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Edited  by  Frank  L.  McVey,  Ph.D..  LL.D., 
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Now  Ready 

THE  COST  OF  LIVING.  Walter  E.  Clark,  Pro- 
fessor and  Head  of  the  Department  of  Political 
Science  in  the  College  of  the  City  of  New  York 

TRUSTS  AND  COMPETITION.  John  F.  Crowell, 
Associate  Editor  of  the  Wall  Street  Journal 

MONEY.  William  A.  Scott,  Director  of  the  Course 
in  Commerce,  and  Professor  of  Political  Economy, 
University  of  Wisconsin 

TAXATION.  C  B.  Fillebrown,  President  Massa- 
chusetts Single  Tax  League,  Author  oi  A  B  C  of 
Taxation 

THE  FAMILY  AND  SOCIETY.  John  M.  Gilette, 
Professor  of  Sociology,  University  of  North  Dakota 

BANKING.    William  A.  Scott 

THE  CAUSE  AND  CURE  OF  CRIME.  Charles  R. 
Henderson,  late  Professor  of  Sociology  in  the  Uni- 
versity of  Chicago 

In  Preparation 

PROPERTY  AND  SOCIETY.    A.  A.  Bruce 

THE  CITY.    Henry  C.  Wright 

STATISTICS.    W.  B.  Bailey 

BASIS  OF  COMMERCK    E.  V.  Robinson 

GOVERNMENT    FINANCE    IN    THE    UNITED 

STATES.    Carl  C.  Plehn 
WOMEN  WORKERS  AND  SOCIETY.     Annie  M. 

McLean 
THE    NEWSPAPER    AS    A    SOCIAL    FACTOR. 

Allan  D.  Albert 
THE    STRUGGLE    FOR    LAND    IN    AMERICA. 

Charles  W.  Holman 

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THE  COST  OF  LIVING 


X 

BY       /3 

WALTER  e:  CLARK 

Ph.D.  (Columbia) 

Professor  and  Head  of  the  Department  of 

Political  Science  in  the  College  of 

the  City  of  Neiv  York 


CHICAGO 
A.  C.  McCLURG  &  CO. 

1915 


Copyright 

A.  C  McClurg  &  Co. 

1915 


Published  May,  1915 


Copyrighted  in  Great  Britain 


EDITOR'S  PREFACE 

"O  ISING  prices  have  been  a  topic  of  conver- 
-*-^  sation  in  many  parts  of  the  land  during 
the  last  decade.  In  response  to  this  feeling, 
legislation  has  been  proposed  and  commissions 
authorized  to  investigate  the  causes  of  high 
prices.  Professor  Clark  has  been  an  earnest 
student  of  price  phenomena  for  a  number  of 
years.  The  book  that  he  writes  does  not  ad- 
vocate a  theory  or  pursue  some  specific  for 
price  troubles,  but  presents  a  brief  statement 
of  facts  about  prices.  Devoted  to  this  pur- 
pose, the  book  should  be  welcomed  by  those 
seeking  accurate  information  about  the  price 
phenomena  of  recent  years. 

F.  L.  M. 


AUTHOR'S  PREFACE 

^T^HIS  little  book  aims  to  set  forth  the  need- 
•*-  ful  facts  and  conclusions  about  rising 
prices.  It  seeks  to  be  simple,  yet  scientific;  to 
be  brief  without  sacrificing  either  proof  or 
color.  It  emphasizes  the  large  gains  due  to 
rising  prices.  It  attempts  to  discriminate  be- 
tween "  remedies  "  which  may  reach  the  cause 
and  those  which  are  irrelevant.  It  tries  to 
show  the  high  probability  that  the  rise  of  prices 
will  be  retarded  or  stopped  by  natural  checks 
before  there  is  pressing  need  to  apply  artificial 
checks. 

Pursuit  of  these  leading  aims  of  the  book 
develops  its  main  variations  from  most  books 
on  this  topic  —  its  reason  for  being. 

Walter  E.  Clark. 

The  College  of  the  City  of  New  York, 
April,  191 5. 


CONTENTS 

PAGE 

Chapter  I.    The  Facts 1 

1.  Retail  Prices  in  the  United  States    ...  2 

2.  Retail  Prices  in  Canada 6 

3.  Retail  Prices  in  Great  Britain 8 

4.  Wholesale   Prices  in   the   United   States, 

Canada,  and  Great  Britain 9 

5.  Rising  Prices  in  Other  Countries    ...  12 

6.  The  Purpose  of  the  Book 12 

Chapter  II.    Money  and  Prices 14 

1.  The  Primary  Money  Unit 14 

2.  The  Effect  of  Demand  on  Prices     ...  16 

3.  Gold  Subject  to  Demand  and  Supply    .     .  18 

4.  The  Ratio  of  Gold  to  Commodities  ...  20 

5.  Some  Causes  for  Rise  of  Prices     ....  21 

Chapter  III.    Supply  Causes 24 

1.  Exhausting   Natural   Resources     ....  24 

2.  Retailers'  Undue  Profits 30 

3.  Adulterated  Goods 33 

4.  Cold  Storage 35 

5.  Labor  Unions 37 

6.  Excessive  Transportation   Rates  ....  45 

7.  High  Protective  Tariff 47 

8.  The  Trusts 50 

Chapter  IV.    Demand  Causes 61 

1.  Increasing  Population  and  Immigration   .  61 

2.  Speculation 65 

3.  Extravagance 70 

4.  Rising  Standard  of  Living 76 

5.  Increased  Gold  Supply 82 


Contents 

PAGE 

Chapter  V.    Effects 99 

1.  On  Business  Generally 99 

2.  On  Wages 101 

3.  On  Salaries  and  Bond  Incomes    ....  109 

4.  On  Debtors  and  Creditors 114 

5.  On  Owning  Producers 114 

6.  On  Interest 117 

7.  On  Crises 118 

8.  On  General  Social  Reform 120 

Chapter  VI.    Remedies 123 

1.  Rising  Prices  May  Be  Beneficial  ....  123 

2.  Will  Prices  Continue  to  Rise 125 

3.  Diminishing  Ratio  of  Annual  Gold  Output  130 

4.  Perfecting  and  Extending  Exchange  Ma- 

chinery      . 132 

5.  Expanding  Volume  of  Trade 134 

6.  Effect  of  the  World  War  on  Prices    .    .  140 

7.  Offsets  to  Losses  Through  Rising  Prices  141 

8.  Arbitrary  Means  to  Stop  General  Rise  of 

Prices 145 

References 154 

Appendix 157 

Index 161 


THE  COST  OF  LIVING 


THE  COST  OF  LIVING 

CHAPTER  I 

THE   FACTS 

T_r  E  was  from  Missouri,  and  a  minister. 
■*■  ■*-  He  spoke  to  his  butcher  over  the  'phone : 
"  Send  me  a  dollar's  worth  of  sirloin  steak  this 
afternoon.  Tell  your  delivery  boy  if  no  one  is 
here  when  he  calls,  just  to  poke  the  steak 
through  the  keyhole."  A  dollar's  worth  of 
any  other  kind  of  meat,  of  flour,  of  eggs,  of 
milk,  or  of  butter,  could  be  poked  through  a 
much  smaller  keyhole  today  than  eighteen 
years  ago.  The  price  of  a  full  dinner  pail 
in  1896  would  not  fill  that  pail  much  over  half 
full  today. 

If  our  Missouri  minister  lived  in  St.  Louis, 
his  sirloin  steak  would  have  cost  him  last  De- 
cember from  twenty-four  cents  to  thirty  cents 
a  pound,  depending  on  his  butcher  and  his  cut. 
The  same  meat  in  the  middle  nineties  would 
have  cost  him  just  about  one-half  as  much. 
Sliced  ham,  which  he  used  to  buy  for  ten  cents 
I 


The  Cost  of  Living 


to  twelve  cents  per  pound,  would  have  cost  him 
twenty-five  cents  to  thirty  cents.  Eggs  that 
formerly  cost  him  twenty  cents  to  twenty-five 
cents  a  dozen  in  mid-winter  now  quote  at  forty 
cents  to  forty-five  cents.  Potatoes  have  risen 
from  fifty  cents  or  seventy-five  cents  a  bushel 
to  $1.25,  and  milk  that  retailed  in  the  nineties 
for  five  cents  a  quart  now  cuts  into  the  minis- 
terial income  nine  cents  for  each  quart.  When 
such  facts  as  these  are  in  mind,  along  with  the 
fact  of  the  meagerness  and  slow  increase  of 
ministerial  salaries,  an  increased  respect  for 
the  American  sense  of  humor  is  due  in  the 
presence  of  a  minister  who  can  joke  when  he 
orders  his  family  meat. 

I.  Retail  Prices  in  the  United  States 

Scientific  proof  that  food  prices  are  soaring 
is  given  in  the  price  range  of  fifteen  selected 
food  articles  published  in  bulletins  of  the  Fed- 
eral Bureau  of  Labor  Statistics.  The  Bureau 
has  listed,  painstakingly,  the  actual  retail  prices 
of  these  fifteen  food  articles  in  the  markets  of 
forty  important  American  industrial  cities. 
These  cities  are  scattered  from  Boston,  New 
York,  and  Charleston  on  the  east,  to  Seattle, 
San  Francisco,  and  Los  Angeles  on  the  west. 


The  Facts  3 

and  from  Buffalo,  Chicago,  and  St.  Paul  in  the 
north,  to  Atlanta,  New  Orleans,  and  Dallas  in 
the  south.  Their  combined  population  is  one- 
fifth  of  the  whole  population  of  the  United 
States.  The  people  of  these  forty  cities  may 
then  be  regarded  as  fairly  representative  of 
the  industrial  population  of  the  whole  nation 
and  the  markets  of  these  cities  may  be  re- 
garded as  typical. 

Outlay  for  these  fifteen  articles  constitutes 
two-thirds  of  the  whole  food  cost,  and  the 
food  cost  constitutes  from  forty  per  cent  to 
forty-five  per  cent  of  total  living  cost  to  an 
average  American  workingman's  family.  The 
significant  character  of  this  table  of  prices  is 
thus  made  manifest. 

For  purposes  of  comparison,  the  prices  of 
each  article  for  the  years  1890  to  1899,  inclu- 
sive, have  been  averaged  and  that  average  in 
each  case  is  called  100.  The  average  price  for 
each  year  is  then  stated  in  relation  to  this  aver- 
age for  the  decade  of  the  nineties.  From  the 
full  table*  resulting,  the  following  items  have 
been  selected  and  tabulated  to  show  the  rapid, 
steady  rise  of  cost  of  living  in  the  United 
States  during  the  past  eighteen  years : 

♦This  full  table  is  given  for  reference  in  Appendix 
A,  see  page  157. 


The  Cost  of  Living 


Retail  Prices  of  Food  Articles  in  the  United  States  * 

' Average  Prices  fot » 

Commodity —       1890-99  1896  1900  1907  1910  1913 

Sirloin    Steak 100    98.8   107.1  116.7  134-0  171.3 

Round  Steak 100  100.5    109.8  128.4  149.9  1995 

Rib  Roast 100    99.4    109.3  123.0  137.7  1720 

Pork   Chops 100    97.8   108.9  1409  178.3  213.8 

Bacon,  smoked 100    96.3    110.3  I577  204.4  225.9 

Ham,  smoked 100    96.5    106.9  i3io  159.4  181. 2 

Lard,  pure 100    92.1    104.9  I33S  172.9  166.6 

Hens    100    96.1     99.6  131.3  155.0  171.8 

Wheat  flour 100    94.2     94.6  118.2  135.9  127.4 

Corn  meal 100    92.8     95.6  133.5  I47-9  160.4 

Eggs — strictly  fresh.   100    90.3     99.1  138.2  158.2  174.8 

Butter — creamery  ....   100    93.1    101.2  127.3  139-9  IS3-2 

Potatoes — Irish 100    78.8     92.8  122.2  119.5  151-2 

Sugar — granulated  . .  100    96.2    103.9  9^-7  102.5  95.3 

Milk  100  100.1    100.0  118.9  131-6  140.2 


Average     for    the 
fifteen  articles .. .  100    94.9   102.9   128.0   148.5    167.0 

The  1 91 3  column  of  this  table  shows  the 
great  price  increases.  Smoked  bacon  is  listed 
at  225.9,  which  is  to  be  compared  with  100 
as  representing  its  average  price  in  the  decade 

♦The  price  figures  for  1914  and  1915  have  not  been 
used  in  this  book  because  the  war  conditions  are  ab- 
normal. Records  of  price  fluctuations,  due  primarily 
to  such  abnormal  and  probably  temporary  conditions 
would  not  contribute  to  an  understanding  of  the  prob- 
lem with  which  this  book  deals,  but  rather  would  tend 
to  cloud  the  issue. 


The  Facts  5 

1890  to  1899.  This  means  that  smoked  bacon 
was,  on  the  average  for  forty  industrial  cities 
of  the  United  States,  more  than  125  per  cent 
higher  in  price  in  19 13  than  in  the  nineties,  or 
nearly  130  per  cent  higher  than  in  1896.  Pork 
chops,  too,  had  more  than  doubled  their  aver- 
age price  for  the  nineties,  and  round  steak  had 
almost  doubled  its  price.  The  other  meats,  and 
eggs,  had  risen  about  seventy-five  per  cent 
above  their  nineties  average.  Three  items  only 
out  of  the  fifteen,  wheat  flour,  milk  and  granu- 
lated sugar  had  risen  less  than  fifty  per  cent. 
Sugar  is  the  solitary  item  in  the  entire  list 
which  had  risen  less  than  twenty-seven  per 
cent.  Sugar  is  a  most  notable  exception,  since 
it  was  in  191 3  nearly  five  per  cent  cheaper  than 
on  the  average  for  the  nineties  and  was  actu- 
ally about  one  per  cent  cheaper  than  in  1896, 
the  year  of  lowest  prices. 

For  the  whole  fifteen  articles  combined  this 
table  shows  a  price  rise  sixty-seven  per  cent 
above  their  average  price  for  the  nineties,  and 
nearly  seventy-six  per  cent  above  their  average 
price  for  the  year  1896,  the  year  since  which 
prices  have  been  rising  steadily.  Omitting 
granulated  sugar,  the  remaining  fourteen 
items  show,  in  191 3,  an  averaged  retail  price 
seventy-two  per  cent  higher  than  in  the  nine- 


The  Cost  of  Living 


ties  and  eighty  per  cent  higher  than  in  the 
lowest  year,  1896.  It  is  notable,  too,  that  for 
the  last  four  months  of  191 3  the  general  aver- 
age price  for  the  fifteen  articles  was  the  high- 
est in  the  whole  eighteen  years  of  rising  price, 
being  nearly  71.4  per  cent  above  the  nineties 
average,  or  nearly  eighty  per  cent  above  the 
average  for  the  lowest  year,  1896. 

Surely  the  past  eighteen  years  in  the  United 
States  have  so  dwarfed  the  food  package  to 
be  bought  for  one  dollar  that  it  is  a  rather  grim 
humor  which  suggests  that  it  might  be  poked 
through  a  keyhole.  And  surely  these  official 
retail  price  figures  for  forty  leading  industrial 
cities  demonstrate  that  it  is  not  mere  rhetorical 
exaggeration,  but  the  speaking  of  plain  truth 
to  say  that  the  price  of  the  full  dinner  pail 
in  the  United  States  of  1896  would  fill  that 
same  pail  little  over  half  full  in  191 3. 

2.  Retail  Prices  in  Canada 

Figures  from  Canada  and  from  Great  Brit- 
ain show  that  retail  prices  in  both  of  those 
countries  have  been  rising.  The  Canadian  De- 
partment of  Labor  has  calculated  from  cur- 
rent retail  prices,  gathered  since  1908  only, 
the  typical  weekly  average  expenditures  for  a 
family  of  five  with  an  income  of  $800  per  year. 


The  Facts 

7 

Typical  Weekly  Expenditure  For  a  Canadian  Family 

OF 

Five  Persons  With  an  Income 

of 

$800  Per  Annum 

Fuel, 

Year 

Food 

Rent 

Light,  Etc. 

Total 

1909 

$6,875 

$2,999 

$1,786 

$11,660 

1910 

7.127 

3-397 

1.827 

12.351 

191 1 

7.481 

3.315 

1.766 

12.562 

1912 

7.823 

3.897 

1. 94 1 

13.661 

1913 

7.702 

4.077 

2.025 

13-804 

The  increase  at  the  end  of  19 13  as  compared 
with  the  cost  at  the  beginning  of  1909  was, 
for  food  twelve  per  cent,  for  rent  35.9  per 
cent,  for  fuel,  lighting,  etc.,  13.4  per  cent,  and 
for  total  expenditure  18.4  per  cent.  This 
shows  a  rise  in  general  living  cost  to  the  rep- 
resentative Canadian  workingman's  family  of 
over  eighteen  per  cent  in  the  last  four  years! 

The  American  retail  price  tables  given  above 
show  that  the  fifteen  selected  food  articles  rose 
nineteen  per  cent  from  1909  to  19 13.  This 
compares  with  the  twelve  per  cent  food  cost 
rise  in  Canada  during  the  same  years.  The 
only  other  living  cost  items  for  which  the 
retail  United  States  prices  are  given  for  some 
years  by  the  Federal  Bureau  are  anthracite  and 
bituminous  coal.  Figures  for  these  cover  the 
period  1907  to  19 13  only,  and  show  a  rise,  for 
this  period,  in  average  prices,  of  nine  and  two- 
tenths  per  cent  for  anthracite,  and  five  and 


8  The  Cost  of  Living 

four-tenths  per  cent  for  bituminous  coal.  These 
figures  compare  with  the  Canadian  rise  of  13.4 
per  cent  in  fuel,  lighting,  etc.,  from  1909  to 

1913- 

J.  Retail  Prices  in  Great  Britain 

In  the  Abstracts  of  Labor  Statistics  for  the 
United  Kingdom  the  official  British  retail 
prices  for  twenty-three  selected  food  articles 
are  given.  The  index  numbers  average  the  re- 
tail prices  of  these  twenty-three  articles  year  by 
year  and  are  weighted  in  accordance  with  ex- 
penditure in  wage  earners'  families.  They  are 
given  here  to  show  the  shrinkage  in  the  Brit- 
ish dinner  pail  content  for  a  given  expenditure, 
in  recent  years,  as  compared  with  the  later 
nineties. 

Weighted  Index  Numbers  in  the  United  Kingdom  for 

Retail  Prices  of  Twenty-three  Selected 

Food  Articles 

Average  Price  for  1900,  100 


Year 

Index  No. 

Year 

Index  No. 

1896 

91.7 

190S 

102.8 

1897 

95-5 

1906 

102.0 

1898 

995 

1907 

105.0 

1899 

954 

1908 

107.5 

1900 

1 00.0 

lyog 

107.S 

1901 

100.4 

1910 

109.4 

1902 

lOI.O 

1911 

109.4 

1903 

102.8 

1912 

1 145 

1904 

102.4 

1913 

1 143 

The  Facts  g 

This  table  shows  that  retail  food  prices,  in 
Great  Britain,  were  in  191 3,  14.8  per  cent 
higher  than  in  1900,  and  25.2  per  cent  higher 
than  in  1896,  the  year  of  lowest  British  retail 
prices. 

4.  Wholesale   Prices   in    the    United   States, 
Canada,  and  Great  Britain 

These  three  nations  publish  wholesale  price 
lists  which  cover  a  far  wider  range  of  com- 
modities. These  wholesale  lists  may  be  taken 
as  the  best  indicators  of  the  rise  of  general 
prices  during  the  last  eighteen  years. 

For  the  United  States,  the  Bureau  of  Labor 
Statistics  publishes  the  course  of  wholesale 
prices  of  two  hundred  and  fifty-two  commodi- 
ties. The  average  price  for  the  decade  1890- 
99  is  the  base  also  in  this  table,  and  the  figures 
representing  all  of  the  commodities  are  aver- 
aged for  each  year  to  give  the  index  number 
for  the  whole  two  hundred  and  fifty-two  com- 
modities. Bradstreet's  Journal  follows  the 
wholesale  prices,  for  the  United  States,  of 
one  hundred  and  six  commodities  in  general 
use.  The  actual  prices  per  pound  of  the  sev- 
eral commodities  are  added  together  to  give 
the  index  numbers  of  this  table.     They  are 


lo  The  Cost  of  Living 

listed  here  for  comparison  with  the  Federal 
Bureau's  table. 

The  Canadian  Department  of  Labor,  using 
the  same  1890-99  base  years,  and  the  same 
index  number  methods  as  are  used  by  the 
United  States  Bureau,  lists  the  wholesale 
prices  of  two  hundred  and  seventy-two  Cana- 
dian commodities.  The  British  reports  cover 
the  wholesale  prices  of  only  forty-seven  com- 
modities, use  the  one  year  1900  as  the  base, 
and  weight  the  prices  according  to  annual 
consumption  of  these  articles  in  the  United 
Kingdom.  These  British  figures  are  not, 
therefore,  comparable  with  those  in  the  Amer- 
ican and  Canadian  tables,  but  they  are  listed 
with  the  others  because  they  indicate  the  trend 
of  British  prices.  The  year  of  lowest  prices 
since  1890  was  1896  in  the  British  table,  and 
1897  ^^  the  tables  for  the  United  States  and 
for  Canada.  The  prices  are,  therefore,  given 
from  1896  on,  in  the  following  table: 

Index  Numbers  of  Wholesale  Prices  in  Great  Britain, 
Canada,  and  the  United  States,  1896  to  1913 


Year 

Great  Britain 

Canada 

United  States  Bradstreet 

1896 

88.2 

92.5 

90.4 

$5.9124 

1897 

90.1 

92.2 

89.7 

6.1 159 

1898 

93-2 

96.1 

934 

6.5713 

1899 

92.2 

100. 1 

101.7 

7.2106 

The  Facts 

II 

Year 

Great  Britain 

Canada    United  States  Bradstreet 

1900 

1 00.0 

108.2 

iio.s 

7-8839 

1901 

96.7 

107.0 

108.5 

7-5746 

1902 

96.4 

109.0 

1 12.9 

7-8759 

1903 

96.9 

1 10.5 

1 136 

7-9364 

1904 

98.2 

1 1 1.4 

1 130 

7.9187 

1905 

97-6 

1 13-8 

II5-9 

8.0987 

1906 

100.8 

120.0 

122.5 

8.4176 

1907 

106.0 

126.2 

129.5 

8.9045 

1908 

103.0 

120.8 

122.8 

8.0094 

1909 

104.1 

121.2 

126.5 

8.5153 

1910 

108.8 

124.2 

131-6 

8.9881 

191 1 

109.4 

127.4 

129.2 

8.6886 

1912 

114-9 

1344 

133-6 

9.1867 

1913 

1 16.5 

135-5 

135-2 

9-21 15 

The  similarity  both  in  range,  and  year  by 
year,  of  the  Canadian  and  the  American  re- 
turns is  striking.  It  is  notable  that,  while  the 
range  of  British  prices  is  not  so  great  as  that 
for  the  new  world  countries,  the  general  trend 
is  the  same.  All  three  tables  registered  their 
lowest  points  in  1896  or  1897.  Their  index 
figures  rise  fairly  steadily  until  1908,  when 
they  all  drop  ofT  sharply,  registering  the  ef- 
fects of  the  world  financial  depression  in  that 
year.  All  three  again  rise  steadily  from  1908 
until  19 1 3.  The  year  of  highest  average  price 
in  each  table  is  the  year  191 3.  The  figure  for 
1913  as  compared  with  that  of  the  lowest  year 
shows  a  rise  in  average  wholesale  prices  in 
the   seventeen  years   since    1896-97  of   ovej" 


12  The  Cost  of  Living 

thirty-two  per  cent  in  Great  Britain,  of  nearly 
forty-seven  per  cent  in  Canada,  and  of  over 
fifty  per  cent  in  the  United  States. 

5.  Rising  Prices  in  Other  Countries 

Similar  returns  are  given  in  the  price  tables 
for  France  and  for  Germany,  those  for  France 
corresponding  a  little  more  closely  to  the  Brit- 
ish returns  and  those  of  Germany  to  the  re- 
turns of  Canada  and  of  the  United  States. 
Before  the  war  came  great  popular  processions 
in  Vienna  were  clamoring  that  the  government 
take  action  to  relieve  suffering  caused  by  ris- 
ing prices.  Switzerland  made  an  official  inves- 
tigation into  the  rising  cost  of  living  in  191 1, 
and,  in  19 12,  a  Public  Commission  reported 
on  the  Cost  of  Living  in  New  Zealand.  Even 
from  the  far  interior  of  China  report  comes 
that  prices  are  now  nearly  double  what  they 
were  eighteen  or  twenty  years  ago. 

6.  The  Purpose  of  the  Book 

Enough  has  here  been  given  to  show  that 
prices  are  rising  all  over  the  world  and  that 
everywhere  men  are  observing  them,  are 
searching  out  their  causes  and  their  effects.  It 
is  fitting  that  people  of  the  United  States,  when 
general  prices  have  risen  steadily  and  rapidly 


The  Facts  13 

for  many  years,  should  study  this,  the  most  no- 
table experience  which  the  whole  world  is  hav- 
ing in  common  during  this  generation.  It  is 
the  purpose  of  this  book  to  outline  the  way  for 
such  study.  This  chapter  has  attempted  to  sug- 
gest the  answers  to  such  queries  as :  How  gen- 
erally, and  to  what  degree,  and  during  what 
period  have  prices  risen  ?  Coming  chapters  in 
order  will  seek  to  outline  answers  to  the 
queries :  How  are  prices  made  ?  Why  are  prices 
rising?  What  are  the  effects  of  rising  prices? 
What  are  the  natural  checks  upon  rising  prices 
and  what  artificial  means  might  be  used  ef- 
fectively to  check  or  to  stop  the  rise  of  prices? 


CHAPTER  II 

MONEY  AND   PRICES 

TViTEN  measure  the  worth  of  things  they 
"*■"■■  buy  and  sell.  As  a  value-measuring 
unit  they  choose  some  definite  amount  of 
some  given  thing.  Today  that  chosen  thing  is 
gold  throughout  the  world.  The  definite  amount 
of  gold  used  as  the  measuring  unit  is  set  arbi- 
trarily by  the  government  of  each  nation.  For 
example,  the  standard  gold  dollar  in  the  United 
States*  must  contain,  by  the  arbitrary  fiat  of 
the  government,  25.8  grains  of  standard  gold. 
Standard  gold,  by  the  same  arbitrary  fiat, 
must  be  nine-tenths  pure  gold.  In  effect,  then, 
the  measuring  unit  of  value  in  the  United 
States  is,  and  has  been  since  1837,  23.22  grains 
of  pure  gold.  When  an  alleged  watch  sells  for 
one  dollar,  the  value  of  that  watch  is  equal  to 
the  value  of  23.22  grains  of  pure  gold. 

I.  The  Primary  Money  Unit 
The  thing,  a  definite  amount  of  which  a  gov- 
ernment fixes  as  the  measuring  unit,  is  called 

♦  Throughout  this  book  the  term  United  States  means 
United  States  of  America. 

14 


Money  and  Prices  15 

the  primary  money  medium.  In  accord  with 
government  specifications  as  to  weight,  shape, 
size,  engraving  and  percentage  of  the  pure 
money  medium  contained,  the  government 
mints  issue  what  are  known  as  the  primary 
coins  of  the  realm.  Such  primary  coins  are 
called  the  primary  money  of  the  realm.  Thus, 
$2.50,  $5,  $10,  and  $20  gold  pieces  are  the 
primary  coins  or  the  primary  money  of  the 
United  States.  Gold  one  dollar  pieces  have  not 
been  coined  since  1890,  but  this  does  not  change 
the  legal  fact  that  the  standard  gold  dollar  is 
the  value-measuring  unit.  Five  dollar  and  ten 
dollar  gold  pieces,  as  they  come  from  the  mints, 
contain  respectively  five  and  ten  times  the 
amounts  of  standard  and  of  pure  gold  which 
the  coinage  law  specifies  for  the  one  dollar 
gold  piece. 

A  government  may  have  coins  made  of  other 
metals  also,  and  may  legalize  the  issue  of  pa- 
per notes.  Such  coins  and  notes  are  really 
representative  of  primary  coins,  and  should 
properly  be  called  representative  money.  Thus, 
in  the  United  States,  copper  cents,  silver  dol- 
lars, and  "greenbacks"  are  representative  of 
gold  coins.  It  is  by  law  declared  that  the 
Secretary  of  the  Treasury  shall  keep  all  monies 
of  the  nation  at  a  parity,  and  obedience  to  this 


1 6  The  Cost  of  Living 

command,  in  last  analysis,  involves  redemption 
in  gold  of  all  other  lawful  forms  of  money. 
All  legal  dollars  of  the  United  States  may  well 
"look  alike"  to  any  user  of  money,  for  each 
of  them  must  be  the  equal  of  the  standard  gold 
dollar;  that  is,  the  equal  in  value  of  23.22 
grains  of  pure  gold. 

People  of  the  United  States,  then,  measure 
the  worth  of  shoes  or  snuff,  lanterns,  or  day's 
labor,  the  worth  of  any  and  of  all  things  and 
services  in  money;  that  is,  in  grains  of  gold. 
Such  measurements  are  stated  in  dollars,  and 
so  stated  are  called  prices. 

2.  The  Effect  of  Demand  on  Prices 

During  the  great  blizzard  in  1889,  milk  sold 
for  as  high  as  one  dollar  a  quart  in  New  York 
City.  Cut  off  wholly  from  its  outside  sources 
of  supply,  the  city  was  compelled,  during  its 
storm-bound  days,  to  depend  upon  the  chance 
unsold  remnant  of  the  first  storm  day's  sup- 
ply. Eager  bidders  for  this  scant  supply  quickly 
drove  a  six-cent  article  up  to  the  dollar  point. 
This  illustrates  the  simple  truth  that  when  a 
community's  purchasing  power  and  its  demand 
for  a  given  thing  remain  the  same  as  usual,  but 
the  supply  of  that  thing  becomes  much  less 
than  usual,  the  price  of  that  thing  will  rise. 


Money  and  Prices  17 

In  early  season  strawberries  may  sell  for  a 
quarter  a  box.  But  later  the  red  boxes  pour 
into  the  markets  and  better  berries  than  the 
first  comers  may  sell  for  a  dime  a  box.  This 
seasonal  range  of  berry  prices  finds  counter- 
part in  the  price  range  of  anything  when  the 
community's  purchasing  power  and  demand  for 
that  thing  remain  about  the  same  while  the 
supply  of  that  thing  becomes  much  greater. 

When  Peter  de  Hooghe,  "he  of  the  velvet 
brush,"  was  painting  his  cheerful  pictures,  fif- 
teen to  twenty-five  dollars  would  buy  one  of 
them.  The  number  of  his  genuine  works  has, 
perhaps,  not  changed  since  his  death.  Dis- 
criminating art  critics  have  awakened  the  art 
loving  world  to  high  appreciation  of  the  sim- 
ple, peaceful,  domestic  sunshine  which  radiates 
from  a  De  Hooghe  canvas.  The  growing  de- 
mand for  his  paintings  has  so  raised  their 
price  that  one  of  them  will  now  bring  a  thou- 
sand times  what  it  brought  when  the  artist 
lived.  In  this  case  the  supply  of  the  thing 
has  remained  the  same,  but  the  demand  for  it 
has  so  increased  as  to  bring  largely  increased 
price. 

Twenty-five  volume  sets  of  the  Ninth  Edi- 
tion of  the  Encyclopedia  Britannica,  bound  in 
full  Morocco,  may  be  bought  for  two  dollars. 


1 8  The  Cost  of  Living 

The  supply  of  such  sets  is  probably  somewhat 
less  than  it  was  in  the  earlier  nineties,  when 
such  sets  sold  for  over  two  hundred  dollars. 
The  explanation  is  simple.  They  are  out  of 
date.  Few  people  care  to  give  them  even  shelf 
room.  Their  price  has  dropped  as  the  price 
of  anything  drops  when,  the  supply  remaining 
the  same,  the  demand  for  the  thing  is  much 
less  than  before. 

These  four  cases  may  be  summarized  in  one 
sentence :  Other  things  all  remaining  the  same, 
the  price  of  anything  rises  when  either  the  sup- 
ply of  that  thing  decreases  or  the  demand  for 
it  increases,  and  the  price  of  anything  falls 
when  either  the  supply  of  that  thing  increases 
or  the  demand  for  it  decreases. 

J.  Gold  Subject  to  Supply  and  Demand 

One  further  step  now  will  aid  to  clearer  un- 
derstanding later.  Gold  is  a  thing,  bought 
and  sold,  just  as  other  things  are.  Just  as 
other  marketed  things,  it  is  useful  to  man  and 
it  is  limited  in  its  supply  relative  to  man's  need 
for  it.  It  is  subject,  then,  to  the  same  supply 
and  demand  conditions  which  affect  man's 
measurements  of  the  usefulness  to  him  of  other 
things.  Increase  its  supply  greatly,  without 
changing  the  demand  for  it  correspondingly, 


Money  and  Prices  19 

and  man  rates  a  unit  of  it  as  worth  less  to 
him,  or  gold  may  be  said  to  grow  cheaper. 
Increase  the  demand  for  it  greatly  without  cor- 
respondingly increasing  its  supply,  and  man 
rates  a  unit  of  it  as  worth  more  to  him  than  be- 
fore, or  gold  may  be  said  to  grow  dearer. 

All  this  may  seem  very  clear  and  simple,  but 
confusion  enters  easily  when  attempt  is  made 
to  bring  together  this  thinking  about  the  prices 
of  other  things  and  this  thinking  about  the 
value  of  gold.  In  the  world's  price-making  the 
values  of  all  other  marketed  things  are  esti- 
mated in  terms  of  money;  that  is,  as  shown 
above,  in  terms  of  gold.  Men  grow  accus- 
tomed to  state  all  valuations  in  these  money 
or  gold  terms.  It  is  easy,  then,  for  them  to 
state  their  valuation  of  gold  itself  in  terms 
of  money  without  realizing  that  in  so  doing 
they  are  moving  in  a  closed  circle.  For  exam- 
ple, an  easy  blunder  for  a  man  to  make  is 
that  he  insist  that  the  value  of  gold  has  not 
changed  in  the  United  States  since  1837,  be- 
cause the  United  States  mint  has  been  ready 
practically*  to  pay  exactly  one  dollar  for  each 
23.22  grains  of  pure  gold  all  these  years,  and 
is  so  ready  today.     It  is  clear  that  the  price 

*  For  the  purposes  of  this  argument,  the  slight  charge 
to  cover  the  cost  of  the  alloy,  etc.,  is  negligible. 


20  The  Cost  of  Living 

of  gold  has  not  changed  since  1837,  and  he 
cavalierly  moves  at  once  to  the  proposition  that 
the  value  of  gold  has  not  changed.  He  does 
not  see  that  to  talk  about  the  price  of  gold 
is  to  define  a  thing  in  terms  of  itself.  The 
dollar  in  the  United  States  is,  practically,  23.22 
grains  of  gold,  so  fixed  by  law,  and,  so  long  as 
this  remains  the  law,  so  long,  of  course,  will 
23.22  grains  of  gold  be  priced  at  one  dollar, 
which  means  no  more  than  to  say  that  23.22 
grains  of  gold  are  equal  to  23.22  grains  of 
gold.  Obviously,  the  gold  price  of  gold  cannot 
change. 

4.  The  Ratio  of  Gold  to  Commodities 

Men  say  the  price  of  wheat  rises  or  falls, 
from  time  to  time,  because  they  measure  its 
usefulness  in  terms  of  another  thing,  viz.,  gold. 
By  continually  assuming  that  that  other  thing, 
gold,  is  unvarying  in  value,  they  are  led  to 
conclude  that  all  variations  in  the  price  of 
wheat  must  be  due  alone  to  variations  in  the 
supply  of  wheat  or  in  man's  need  for  wheat. 
By  wholly  overlooking  the  facts  that  gold  itself 
is  a  thing  and  may  itself  be  varying  in  value, 
they  are  overlooking  the  fact  that  variations 
in  the  supply  of  gold  itself  may  cause  varia- 
tions in  the  price  of  wheat,  quite  apart  from 


Money  and  Prices  21 

any  change  in  the  supply  of  wheat  or  in  man's 
need  for  wheat.  But  no  man  can  be  guilty  of 
this  oversight  and  yet  be  clear  in  an  under- 
standing of  prices.  In  order  that  this  fatal 
oversight  may  be  avoided,  increased  gold  sup- 
ply will  be  dealt  with  in  the  second  chapter 
following,  as  a  demand  cause  of  rising  prices. 
We  noted  in  the  foregoing  chapter  that  the 
prices  of  things  generally  have  been  rising  all 
over  the  commercial  world  for  nearly  a  score 
of  years.  Having  prepared  ourselves  for  later 
analysis  by  a  brief  study  of  price  relations  in 
this  chapter,  we  must  next  try  to  find  the 
causes  of  this  protracted  and  general  rise  in 
prices. 

5.  Some  Causes  for  Rise  of  Prices 

Many  alleged  causes  have  been  cited  during 
the  past  decade  of  world-wide  discussion  about 
rising  prices.  In  an  age  which  boasts  itself 
scientific,  a  free-for-all,  easy-chair  guessing 
contest  has  gone  on.  To  the  query:  "What 
causes  prices  to  rise?"  every  group  in  the 
United  States  has  guessed  its  answer.  The 
farmer  guesses  "excessive  railway  freight 
charges,"  and  the  railway  man  guesses  "  unsci- 
entific farming";  the  union  labor  man  guesses 
"trusts,"   and  the  big  manufacturer  retorts 


22  The  Cost  of  Living 

"  unionist  restriction  of  output  and  enforce- 
ment of  high  wages  and  short  hours."  One 
great  political  party  guesses  "Mother  High 
Protection  and  her  stalwart  son,  the  Trust"; 
another  "disappearing  free  lands,  increasing 
population  and  increasing  gold  supply";  a 
third,  "  the  wickedness  of  things  in  general  un- 
der the  reign  of  profit-taking  capitalists,"  and 
a  fourth  would  relieve  the  family  budget  strain 
by  exorcising  Demon  Rum.  The  pulpit  guesses 
"extravagant  indulgence  in  the  flesh-pots  and 
sinful  speculating,"  while  at  least  one  master 
speculator  finds  his  "remedy"  in  squeezing 
the  water  out  of  other  people's  stocks.  The 
ultimate  consumer  is  sure  the  middleman  is 
principally  to  blame,  and  the  middleman  is 
just  as  sure  it  is  the  trust  magnate  or  the  rent- 
raising  landlord.  The  publicist  explains  by 
means  of  increasing  population  pressure,  the 
economist  suggests  diminishing  returns  from 
land  and  increasing  gold  supply,  and  meanwhile 
everybody  is  sure  that  the  world  war  is  now 
rocketing  prices.  Here  is  the  multitude  of 
counsellors  —  the  puzzle  being  to  find  the  wis- 
dom. Possibly  we  may  at  least  approach  nearer 
the  truth  if  we  pass  in  review  a  number  of 
these  alleged  causes,  making  brief  study  of 
each  in  the  light  of  some  facts. 


Money  and  Prices  23 

The  short  study  of  price  relations  in  this 
chapter  suggests  a  classification  under  which 
some  of  these  alleged  causes  may  be  analyzed 
in  following  chapters.  It  has  appeared  that 
things  rise  in  price  when,  other  conditions  re- 
maining the  same,  either  their  supply  decreases 
or  demand  for  them  increases.  Some  of  these 
alleged  causes,  then,  if  they  are  real  causes, 
must  push  prices  upward  by  restricting  supply, 
others  by  increasing  demand. 

In  the  first  class,  the  alleged  Supply  Causes, 
may  be  listed : 

a — Exhausting  natural  resources. 

b — Retailers'  undue  profits  and  short  weights. 

c — Adulterated  goods. 

d — Cold  storage. 

e — Labor  unions. 

/ — Excessive  transportation  rates. 

g — Tariff. 

h — Trusts. 
In  the  second  class,  the  alleged   Demand 
Causes,  come: 

a — Increasing  population  and  immigration. 

b — Speculation. 

c — Extravagance  and  waste. 

d — Rising  standard  of  living. 

e — Increasing  gold  supply. 
The  next  two  chapters  will  be  devoted  to 
brief  treatments  of  these  alleged  causes  in  the 
order  here  given. 


CHAPTER  III 

SUPPLY   CAUSES 

"DRIEF  analysis  of  alleged  causes  which 
■*-'  must  appreciably  curtail  supply  of  things 
if  they  are  real  causes  of  rising  prices,  should 
show  their  merits. 

I.  Exhausting  Natural  Resources 

Have  the  natural  resources  of  the  United 
States  been  exhausted  as  compared  with  their 
richness  prior  to  1890,  to  an  extent  which 
makes  this  exhaustion  an  appreciable  cause  of 
rising  prices? 

Free  arable  land  of  good  quality  has  prac- 
tically disappeared  in  the  United  States.  The 
tens  of  millions  of  acres  of  public  lands  still 
listed'  as  "  unappropriated  "  have  been  closely 
culled  until  little  remains  that  is  not  swamp, 
desert,  or  mountain.  Homesteaders  of  these 
days  are  settling  the  bench  lands  and  starving 
out  their  five  years'  period  in  fond  hope  that 
some  irrigating  scheme  may  materialize  and 
make  it  worth  while  to  pay  taxes  on  their  quar- 
24 


Supply  Causes  25 

ter  sections.  Occasionally  the  restrictive  cor- 
don is  drawn  closer  about  some  dwindling  band 
of  Indians  and  the  resulting  rush  of  claimants 
for  the  newly  opened  reservation  lands  usually 
records  a  score  of  applicants  for  each  quarter 
section  offered. 

The  annual  tens  of  thousands  of  intelligent 
and  sturdy  farmers  who,  in  recent  years,  have 
been  emigrating  from  the  United  States  to 
Canada  are  eloquent  and  lamentable  evidence 
that  promising  free  or  small-cost  farming  op- 
portunities cannot  now  be  found  in  this  United 
States.  What  a  contrast  with  the  United 
States  of  a  generation  ago,  lavishly  endowing 
education,  and  railways,  and  homesteaders  by 
the  ten  thousand,  with  lands  from  a  public 
domain  that  seemed  inexhaustible ! 

And  the  story  of  free  lands  is  paralleled  by 
the  story  of  white  pine,  of  oil,  of  coal,  or  of 
iron  ore.  Only  yesterday  "inexhaustible" 
seemed  the  word  to  use  with  reference  to  the 
land's  supply  of  each  of  these  basic  things. 
Tall,  straight  pines  stood  thickly  miles  and 
miles  in  seemingly  endless  tracts,  crude  oil  was 
spouting  in  geysers  and  begging  for  market 
at  a  few  cents  a  barrel,  black  diamond  beds 
seemed  to  assure  endless  riches  of  energy  for 
the  country's  industries,  and  rich  hills  of  iron 


26  The  Cost  of  Living 

ore  lay  in  ranges  ready  for  surface  scoops. 
But  unless  artificial  forestation  renews  the 
pine  woods  clear  white  pine  boards  will  soon 
be  found  in  museums  only,  relics  of  a  squan- 
dered patrimony. 

Whole  areas,  only  a  short  time  ago  gushing 
with  cheap  oil,  are  now  almost  wholly  drained 
and  each  new  field  opened  passes  rapidly  from 
the  geyser  period  through  the  flowing-well 
period  to  the  fading  days  when  a  score  of  one 
and  two  barrelers  are  hooked  up  to  each  cen- 
tral pump.  One  generation  found  huge  oil 
lakes  just  west  of  the  Alleghanies  and  drained 
them  dry,  hurried  on  to  stud  Texas  and  Cali- 
fornia fields  with  creaking  derricks,  and  now 
stands  at  the  Rio  Grande,  gazing  almost  covet- 
ously at  the  new  oil  geysers  in  a  neighboring 
land. 

One  single  generation  has  exploited,  well 
toward  the  exhaustion  point,  the  "rock  oils" 
of  half  a  continent,  at  the  creating  and  storing 
of  which  Nature  had  been  busy  millions  of 
years !  And  men  are  beginning  to  predict  the 
not  distant  day  when  even  the  Mesaba  and  the 
Vermilya  ore  ranges  must  be  abandoned  as 
worked  out  —  a  day  when  leadership  in  steel 
production  may  pass  to  Mexico  or  to  China  or 
to  Africa. 


Supply  Causes  2y 


Once  a  large  exporter  of  food  stuffs  and 
raw  materials,  the  United  States  is  slowly, 
steadily  approaching  the  time  when  it  will  con- 
sume its  own  entire  output  of  such  goods.  In 
1898  the  United  States  imported,  under  the 
general  tariff  act,  unfinished  lumber  valued  at 
$1,897,305.37;  corresponding  figures  for  1907 
and  1913  were  $14,623,256.02  and  $18,907,- 
345,  respectively.  In  1898  it  imported  1,374 
barrels  of  wheat  flour;  in  1907,  48,005  barrels 
and  in  191 3,  107,555  barrels.  In  1898,  under 
the  general  classification  of  pig  iron,  the  im- 
port was  valued  at  $143,392.  Similar  imports 
in  1907  were  valued  at  $5,862,930,  and  in 
1913  at  $6,402,555. 

Per-capita  production  of  wheat  in  the 
United  States  has  decreased  markedly.  For 
the  period  1876  to  1885  the  average  annual 
yield  per  capita  was  eight  and  three-tenths 
bushels.  For  the  period  1 906-1 908,  it  was 
seven  and  nine-tenths  bushels  and  it  sank 
further  in  19 10-19 12  to  only  seven  and  one- 
tenth  bushels  per  capita,  falling  as  low  as  six 
and  six-tenths  bushels  per  capita  in  the  single 
year  191 1. 

The  cattle  product  of  this  country  has  been 
decreasing  absolutely  in  recent  years,  while 
the  population  has  been  steadily  rising.    The 


28  The  Cost  of  Living 

cattle  product  figures  are :  1 9 1  o  —  71 ,099,000 
head;  191 1 — 69,080,000;  191 2  —  57,958,000, 
and  1913  —  56,527,000.  Comparison  over  the 
longer  period  shows  that  in  1890  the  United 
States  produced  per  capita  sixty-nine  one- 
hundredths  of  a  head  of  cattle;  in  1900  the 
production  fell  to  fifty-eight  one-hundredths 
head  per  capita,  then  the  lure  of  better  prices 
caused  a  rise  climaxing  in  19 10,  with  a  produc- 
tion of  seventy-seven  one-hundredths  of  a 
head  per  capita.  The  steady  decline  followed, 
showing  in  191 3  a  per  capita  production  of 
only  fifty-seven  one-hundredths  head,  a  low 
record. 

The  stern  enforcement  of  State  and  Federal 
condemnation  laws  respecting  cattle  affected 
with  tuberculosis  and  with  the  dreaded  foot 
and  mouth  disease,  added  to  the  lure  of  high 
hoof  prices,  will  probably  lower  still  further 
in  years  of  the  immediate  future  the  already 
significantly  low  per  capita  production  record 
of  1913.  Many  of  the  great  cattle  ranges  of 
the  West  have  been  broken  up  by  the  en- 
croachment of  the  farmers.  The  cowboy  is 
rapidly  giving  way  to  the  less  picturesque  man 
at  the  plow,  aided  often  by  extensive  irriga- 
tion systems.  The  limited  pasture  fields  of 
the  fenced  farms  and  the  supplementary  more 


Supply  Causes  29 


expensive  grain  feeding  cooperate  to  diminish 
the  cattle  product.  Resort  to  more  extended 
corn  feeding  in  turn  increases  the  demand  for 
corn  and  aids  in  explaining  the  rise  from  the 
twenty-eight  cent  corn  of  1895- 1900  to  the 
seventy  cent  corn  of  recent  years. 

From  the  Federal  Bulletin  on  wholesale 
prices  for  191 3  a  selection  of  twelve  basic 
food,  fuel,  and  building  supplies  gives  the  fol- 
lowing figures  for  the  year  19 13  as  compared 
with  the  average,  100,  for  1890- 1899  inclu- 
sive: corn,  164.3;  wheat  126.9;  ry^>  120.3; 
oats,  139.8;  cattle,  179.7;  hogs,  189.6;  eggs, 
166.5;  milk,  138.4;  bituminous  coal,  169.7; 
refined  petroleum,  138.5;  white  pine,  213.4 
and  yellow  pine,  174.  The  average  for  the 
entire  252  commodities  was  135.2.  The  above 
twelve  commodity  figures  average  a  little  over 
160,  showing  that  these  twelve  articles  had 
registered  a  rise  above  their  average  prices  in 
the  nineties  more  than  seventy  per  cent  greater 
than  the  average  rise  for  the  entire  252  com- 
modities. Perhaps  this  excess  average  price 
rise  of  these  twelve  staples  above  the  level  to 
which  general  prices  have  risen,  may  be  as- 
cribed to  the  exhaustion  of  the  virgin  gifts 
of  a  marvelously  rich  land. 

The  records,  then,  show  that  in  the  United 


30  The  Cost  of  Living 

States  free  arable  land  has  practically  dis- 
appeared, cattle  ranges  are  yielding  to  truck 
farms,  the  great  forests  of  Maine  and  Mich- 
igan, Oregon  and  Washington  have  been 
ruthlessly  mowed,  three  great  oil  producing 
areas  are  being  rapidly  drained,  even  mountain 
ranges  of  iron  ore  approach  exhaustion,  and 
the  yellow  harvests  of  the  upper  Mississippi 
valley  are  not  keeping  pace  with  the  increase 
of  population.  Whatever  changes  may  come, 
in  the  future,  in  the  other  factors  which  affect 
prices  in  the  United  States,  it  is  altogether 
unlikely  that  these  basic  foodstuffs  and  raw 
materials  will  ever  again  be  as  cheap  as  they 
were  in  the  closing  years  of  the  nineteenth 
century.  The  disappearance  of  the  cream 
products  of  rarely  rich  new  land  is  a  real  and 
a  probably  permanent  factor  in  rising  cost  of 
living. 

2.  Retailers*  Undue  Profits 

Is  the  retail  system  to  blame  for  recent  high 
prices  ? 

Multiplied  small  tradesmen  must  cost  the 
community  more  than  if  it  were  served  its 
goods  from  a  few  large  centrally  located 
stores.  The  aggregated  charges  for  rent,  de- 
livery, administration,  and  clerk  service,  as 


Supply  Causes  31 


well  as  the  aggregate  charges  for  interest  and 
insurance  on  reserve  stock  and  the  writing  off 
of  losses  through  bad  management,  bad  debts, 
perishable  goods,  and  changes  of  fashion  are 
much  greater  for  a  given  volume  of  retail 
business  if  that  business  is  divided  among  a 
thousand  small  stores  than  if  it  is  concen- 
trated in  the  hands  of  a  score  or  fifty  expe- 
rienced merchants.  Large  scale  industry- 
cheapens  cost  just  as  clearly  in  the  retail  as  in 
the  manufacturing  world. 

It  is  the  bitter  fight  among  the  small  com- 
petitors that  causes  much  of  the  short  weight, 
false  scale,  and  false  measure  practices  which 
are  now  and  then  sensationally  discovered  and 
headlined  by  some  aggressive  and  ambitious 
reporter  or  commissioner  of  accounts.  These 
petty  dishonesties  are  not  infrequently  the  last 
resorts  of  men  and  women  whose  moral  sense 
is  numbed  in  the  presence  of  bankruptcy.  If 
the  buying  public  of  the  city  demands  a  gro- 
cery store  and  a  butcher  shop  on  every  block, 
if  the  housewife  insists  upon  exercising  a 
petty  tyranny  which  demands  that  her  pound 
of  prunes  and  eighteen  cent  package  of  sugar 
shall  be  delivered  within  twenty  minutes  on 
implied  penalty  of  the  transference  of  her 
regal  patronage  to  the  next  block,  if  the  lanes 


32  The  Cost  of  Living 

of  ugly,  illkept  small  shops  must  nightmare 
every  section  of  the  city,  replacing  modest  lot 
rentals  by  the  heavy  front  foot  levies,  possible 
even  in  small  shop  areas,  then  the  community 
must  pay  the  piper. 

This  is  not  meant  to  exonerate  the  petty 
rascals.  Unquestionably,  there  is  occasional 
more  or  less  polite  thievery  in  the  retail  busi- 
ness practiced  deliberately  by  store-keeping 
crooks.  Perhaps  more  than  occasionally  among 
such  middlemen  as  produce-brokers  can  be 
found  instances  of  such  bold  robbery  as  would 
disgust  Dick  Turpin  or  Jesse  James.  And  the 
most  serious  feature  of  such  instances  is  that 
one  case  affrights  a  township.  If  one  farmer 
ships  carefully  selected  apples  to  an  agent  and 
finds  himself  helpless  to  secure  any  redress 
when  he  is  coolly  informed  that  his  apples  did 
not  bring  enough  to  pay  the  freight,  storage, 
and  commission  bills  and  that  he  therefore 
owes  the  broker  a  balance,  this  story  goes  the 
rounds  of  a  wide  neighborhood  and  good 
apples  rot  on  the  ground. 

Here  again  the  lack  of  system  and  central- 
ization is  doubtless  a  large  factor.  The  robber 
broker,  after  all,  is  a  twin  brother  to  the  covet- 
ous one  in  the  fable  who  killed  his  goose  to 
get  a  large  supply  of  golden  eggs  at  once. 


Supply  Causes  33 


How  much  better  business  for  apple  brokers 
as  a  class  to  have  the  word  go  round  that 
neighborhood  that  a  square  deal  was  assured 
to  all  shippers  of  fruit,  great  and  small. 

5.  Adulterated  Goods 

Adulteration  systematically  furnishes  in- 
ferior goods.  It  has  been  estimated  that  the 
consuming  American  public  pays  out  $100,- 
000,000  a  year  for  adulterants,  goods  at  their 
best  harmless  and  in  an  estimated  ten  per  cent 
positively  harmful.  Even  the  most  harmless 
of  such  adulterants  may  prove  disastrously 
harmful,  if  the  bull  is  permitted.  If  a  drug, 
for  example,  is  seventy-five  per  cent  "harm- 
less" substitute  for  the  real  article  the  physi- 
cian prescribes,  the  treatment  may  prove 
fatally  inefifective.  These  systematic  adulter- 
ating swindlers  who  advertise  and  sell  rotten 
refuse  preserved  in  benzoate  of  soda  as  first 
grade  vegetables  and  fruits,  who  "  guarantee  " 
papier  mache  to  be  solid  leather,  who  palm 
off  filled  and  mercerized  cotton  as  silk,  and 
who  substitute  iron  for  cork  in  the  life  pre- 
servers with  which  they  equip  a  General 
Slocum,  are  some  further  aberrant  products 
of  that  unregulated  competition  which  has 
been  such  a  fetich  to  many  past  English  and 


34  The  Cost  of  Living 

American  thinkers  and  which,  in  fetich  fervor, 
has  been  recently  dictating  high  and  erring 
policies  in  this  land. 

The  out-of-joint  system  for  the  distribution 
of  goods,  treated  above,  and  the  system  of 
adulterating  goods,  both  keep  prices  higher  at 
any  time  than  prices  would  be  if  goods  were 
pure  and  were  distributed  at  a  minimum  cost. 
It  does  not  appear,  however,  that  either  of 
these  systems  is  a  cause  for  the  generally  rising 
prices  of  the  past  eighteen  years.  If  any 
causal  relationship  obtains,  it  may  seem  that 
the  generally  rising  prices  may  be  the  spur 
which  drives  distributers  and  adulterants  to 
invent  some  of  their  cheating  methods. 

On  the  other  hand,  the  rising  prices  have 
also  spurred 'other  inventors  to  seek  to  cheapen 
retailing  costs  and  to  prevent  adulteration. 
This  past  twenty  years  has  recorded  many 
such  important  inventions.  During  this  time, 
pure  food  and  drug  laws  have  been  enacted 
and  more  or  less  successfully  enforced.  The 
department  store  and  the  mail  order  systems 
have  been  rapidly  and  extensively  developed. 
Chains  of  "cut  rate"  drug  stores  and  of  five 
and  ten  cent  stores  have  spread  over  the  land. 
The  parcels  post  has  brought  together  the  pro- 
ducer and  the  consumer.    The  free  public  mar- 


Supply  Causes  35 


ket  idea  is  gripping  the  imagination  of  the 
people.  These  things  make  for  cheaper  dis- 
tributional costs  and  for  purer  foods  and 
drugs. 

The  reasonable  likelihood,  then,  is  that  the 
margin  of  higher-price  level  to  be  charged 
against  bad  distributive  methods  and  adulter- 
ating systems  is  less  today  than  it  was  before 
1900.  Certainly  it  is  not  enough  greater  so 
that  either  of  these  can  be  classed  as  an  ap- 
preciable cause  of  the  general  rise  of  prices 
since  the  late  nineties. 

4.  Cold  Storage 

Was  it  just  a  passing  headline  fancy  that 
charged  the  cold  storage  system  to  be  a  crimi- 
nal conspiracy  to  raise  prices  on  essential  food 
products  ? 

Eggs  may  illustrate  well,  for  it  was  "  rots  " 
and  "spots"  that  made  the  editorial  columns 
spangle  with  italics  and  large  caps.  The 
storers  buy  them  —  April  fancy  prime  storage. 
Perhaps  they  are  labelled  "  April  primes  "  far 
into  June,  just  as  our  painstaking  forebears 
advisedly  dated  back  their  pine  tree  shillings 
to  1652,  even  though  they  were  striking  them 
off  after  the  Stuarts  had  been  restored  to 
coinage  sovereignty.     The  buying  season  is 


36  The  Cost  of  Living 

over  and  the  storage  bins  are  filled  with  their 
thousands  of  crates  of  eggs.  When  the  scant 
fresh-egg  months  come,  these  stored  eggs 
begin  to  enter  the  market.  If  the  storers  are 
wise,  every  stored  crate  has  been  marketed 
before  the  first  of  April  comes  again  —  usually 
before  the  first  of  March.  Cumulating  in- 
terest and  storage  charges  and  steady  if  slow 
depreciation  in  the  value  of  the  stored  eggs, 
as  the  months  pass,  compel  the  sale  before  a 
new  spring  laying  season  comes.  What,  then, 
has  really  happened?  Has  there  been  any 
diminution  of  egg  supply  during  that  twelve 
month  because  of  the  storage?  Has  there  not 
been  rather  simply  a  redistribution  of  the  sup- 
ply throughout  the  twelve  month  ? 

Instead  of  the  oldtime  clogged  market  in 
April,  May,  and  June,  which  often  pushed  eggs 
down  to  but  a  few  cents  a  dozen,  the  storers 
buy  freely  then,  and  eggs  seldom  go  below 
twenty  to  twenty-five  cents  a  dozen.  In  the 
fall  and  winter  months,  when  fresh  eggs  are 
very  scarce  and  their  price  mounts  to  fifty, 
sixty,  and  even  seventy-five  cents  a  dozen,  the 
cold  storage  crates  supply  the  market  with 
thousands  of  dozens  of  eggs  and  keep  the  egg 
prices  from  going  as  high  in  those  months  as 
they  otherwise  would  go. 


Supply  Causes  37 


There  is  nothing  in  this  process  which 
compels  the  average  price  of  eggs  through  the 
year  to  rise.  On  the  contrary,  if  cold  storage 
methods  applied  to  eggs  has  had  any  effect  on 
the  annual  average  price,  it  has  probably  had 
the  effect  of  somewhat  lowering  the  prices. 
In  the  old  days  an  egg  producer  was  apt  to  be 
thoroughly  discouraged  by  the  fact  that  in 
that  season  of  the  year,  when  his  hens  laid 
freely,  all  other  hens  did  the  same.  Eight 
cent  and  ten  cent  eggs  did  not  pay  him.  The 
cold  storage  invention  gives  the  egg  producer 
some  guarantee  of  a  fair  price  in  his  active 
season.  Undoubtedly,  this  is  one  of  the  rea- 
sons why  American  farm  poultry  produced  in 
1909  almost  three  hundred  million  dozens 
more  of  eggs  than  in  1899. 

5.  Labor  Unions 

Does  organized  labor  so  curtail  the  output 
of  goods  by  its  limitations  of  output,  its  re- 
strictions on  apprenticeship,  and  its  successful 
demands  for  shorter  hours,  and  does  it  force 
higher  wages  —  all  with  the  result  that  prices 
of  life  necessities  rise  primarily  because  of 
increased  labor  cost? 

Anything  like  satisfactory  data  as  to  union 
activity  along  output  restriction  lines  and  as 


38  The  Cost  of  Living 

to  the  relative  productivity  of  the  longer  and 
the  shorter  working  day  are  lacking.  There 
is,  however,  evidence  enough  at  hand  to  make 
it  improbable  that  successful  trade  union  ac- 
tivity is  chargeable  as  an  important  cause  of 
rising  prices. 

In  treating  the  topic  of  ekhausting  resources 
above,  twelve  important  food,  fuel,  and  shelter 
articles  were  cited  which,  on  the  average, 
showed  a  price  range  for  the  year  19 13  over 
sixty  per  cent  higher  than  their  price  range 
for  1890-1899.  The  whole  252  articles  listed 
in  the  Bureau  table  showed  a  price  rise  for  the 
same  period  of  only  thirty-five  per  cent.  It  is 
to  be  noted  that  eleven  of  the  twelve  chosen 
articles  are  produced  by  farmers,  ranchers, 
timber  men,  and  oil  workers.  These  groups 
of  workers  are  not  organized  into  unions,  and 
yet  the  commodities  they  produced  show  a 
price  rise  seventy  per  cent  greater  than  that  of 
average  goods.  Organized  labor  exactions 
evidently  do  not  account  for  this  great  rise  in 
eleven  staples. 

The  last  general  Federal  report  on  wages 
was  published  in  1908  and  covered  wages  for 
1907  and  preceding  years.  This  report 
covered  350,758  workmen,  including  highly 
organized  groups  such  as  the  building  trades 


Supply  Causes  39 


(45,537),  the  marble  and  stone  workers 
(5»3i6),  the  printers  (14,461),  and  the  foun- 
drymen  and  machinists  (27,612).  It  included 
also  28,179  municipal  workmen.  This  repre- 
sentative wage  study  showed  that  the  average 
full  time  weekly  wages  of  these  350,758  work- 
men were,  in  1907,  22.4  per  cent  higher  than 
the  wages  for  similar  work  had  been  on  the 
average  for  the  period  1890- 1899. 

The  report  showed  also  that  the  average 
working  hours  per  week  had  decreased  five 
per  cent  between  1890- 1899  ^^^  ^9^7-  Allow- 
ing for  this  decrease  in  the  weekly  hours,  it 
appears  that  average  hourly  wage  increase  was 
28.8  per  cent.  But  the  staples  above  cited  had 
by  1907  increased  over  fifty  per  cent  in  price 
above  their  prices  in  the  nineties.  If  trade 
union  activity  was  the  sole  cause  of  the  aver- 
age rise  in  wage  of  22.4  per  cent  weekly  for 
this  entire  great  representative  body  of  work- 
men, it  would  be  difficult  to  see  any  close 
causal  connection  between  a  22.4  per  cent 
rise  in  wages  and  a  fifty  per  cent  rise  in 
prices. 

But  the  average  wholesale  price  rise,  up  to 
1907,  of  all  the  more  than  250  commodities, 
was  only  about  thirty  per  cent  and  the  wage 
study  revealed  an  average  rise  in  hourly  wages 


40  The  Cost  of  Living 

of  28.8  per  cent.  This  appears,  perhaps,  a 
startlingly  close  agreement  between  wage  rise 
and  price  rise  and  may  seem  to  lend  color  of 
truth  to  the  proposition  that  forced  wage  rise 
largely  explains  price  rise. 

Three  things,  though,  need  here  to  be  kept  in 
mind.  First,  and  very  important  to  this  argu- 
ment, that  wage  cost  is  seldom  more  than 
fifty  per  cent  of  the  whole  cost  of  producing 
any  article  and  that  in  most  manufacturing 
cases  it  is  less  than  thirty  per  cent,  dropping 
frequently  below  twenty  per  cent  and,  in  a 
number  of  industries,  even  below  five  per 
cent. 

The  United  States  Census  of  19 10,  in  re- 
porting on  expenses  of  production,  lists  manu- 
facturing industries  under  forty-four  classes. 
Of  the  total  reported  expenses  of  production 
wages  constitute  above  forty  per  cent  in  only 
two  of  these  classes,  above  thirty  per  cent  in 
only  four,  above  twenty  per  cent  in  nineteen, 
below  ten  per  cent  in  twelve,  and  below  five 
per  cent  in  nine.  Of  the  whole  forty- four 
classes,  fifteen,  including  the  great  textile, 
clothing  and  foundry  and  machine  shops 
classes,  list  wages  as  between  twenty  per  cent 
and  thirty  per  cent  of  the  full  reported  ex- 
penses of  production.    The  nine  classes  show- 


Supply  Causes  41 


ing  wages  as  less  than  five  per  cent  of  total 
reported  expenses  of  production  are  by  no 
means  unimportant  classes.  They  include 
butter,  cheese  and  condensed  milk  industries; 
slaughtering  and  meat  packing;  flour  and 
grist  mills;  lead  and  copper  smelting  and  re- 
fining; petroleum  refining  and  cane  sugar  re- 
fining. 

For  all  these  forty- four  classes  of  manufac- 
turing industries  of  the  continental  United 
States,  the  average  wage  expense  is  18.6  per 
cent  of  the  total  reported  expenses  of  pro- 
duction. 

The  census  figures  do  not  include  interest 
and  depreciation  items  in  reported  expenses 
of  production.  If  such  items  had  been  secured 
they  would  obviously  have  made  the  above  per- 
centages of  wage  expenses  still  smaller. 

This  one  set  of  facts  materially  weakens  the 
claim  that  rising  wages  are  an  important  item 
in  explaining  rises  of  prices.  For  examples: 
First,  since  wages  are  shown  to  be  only  three 
and  nine-tenths  per  cent  of  the  reported  ex- 
pense of  production  in  the  slaughtering  and 
meat  packing  industry,  if  wages  in  that  in- 
dustry in  1909  had  been  even  double  what  they 
were,  the  expense  of  production  would  have 
been  increased  less  than  four  per  cent.    Second, 


42  The  Cost  of  Living 

a  further  rise  of  twenty-five  per  cent  in  wages 
paid  in  the  boot  and  shoe  industry,  in  which 
wages  were  reported  as  20.6  per  cent  of  total 
production  expenses,  would  mean  an  increase 
of  little  more  than  five  per  cent  in  the  total 
expenses  of  producing  boots  and  shoes.  Third, 
to  use  the  general  figures  for  illustrative 
application,  since  the  census  reports  that  the 
manufacturing  industries  of  the  country  taken 
as  a  whole  show  wages  to  be  only  18.6  per  cent 
of  the  total  reported  expenses  of  production, 
then  an  average  rise,  since  the  nineties,  of  even 
forty  per  cent  in  wages,  would  mean,  in  manu- 
factures, an  increase  of  less  than  eight  per  cent 
in  expenses  of  production.  The  average  rise 
of  full  time  weekly  wages  that  has  occurred 
since  the  nineties  is  probably  appreciably  less 
than  forty  per  cent.*  Therefore,  if  even  the 
full  wage  rise  that  has  occurred  is  chargeable 
to  the  activity  of  labor  organizations,  such 
activity  would  be  chargeable  with  not  more 
than  an  eight  per  cent  rise  in  the  expenses  of 
production  in  manufacturing  lines.  It  must 
be  noted  that  these  figures  are  the  reported 
figures  for  manufactures  only.  The  wages  un- 
doubtedly average  a  higher  per  cent  of  the  cost 
of  production  in  the  extractive  industries. 
*  See  Chapter  V,  p.  105. 


Supply  Causes  43 


The  second  thing  to  be  kept  in  mind,  in  this 
connection,  is  that  the  assumption  that  aggres- 
sive trade  union  activity  is  to  be  accepted  as 
the  cause  of  wage  rise  even  among  union 
laborers  is  seriously  open  to  question.  For 
example,  the  5,463  boot  and  shoe  workers, 
listed  in  the  Bureau  study,  had  received  an 
average  weekly  rise  of  24.3  per  cent  in  wages 
(nearly  two  per  cent  more  than  the  average 
rise  for  all  the  workers  studied),  and  yet  the 
Boot  and  Shoemakers'  Union  had  been  notably 
inactive  and  ineffective  in  changing  the  wages 
and  hours  of  its  members. 

A  third  fact  should  be  noted  which 
seems  to  challenge  the  proposition  that  trade 
union  activity  is  an  important  factor  in  the 
rise  of  prices.  The  census  of  1910  gave  the 
total  population  of  the  United  States,  exclusive 
of  outlying  possessions,  as  91,972,266  persons 
and  it  listed  38,167,336  of  these  as  "gainful 
workers."  Granting  that  the  American  Feder- 
ation of  Labor  has  some  more  than  2,000,000 
members,  and  making  generous  allowance  for 
the  membership  of  the  unions  which  are  not 
affiliated  with  the  Federation,  the  total  number 
of  organized  laborers  in  the  United  States 
must  be  less  than  3,000,000.  Organized  labor, 
then,  includes  in  its  ranks  less  than  one  in 


44  The  Cost  of  Living 

every  twelve  of  the  gainful  workers  of  the 
country.  Is  it  reasonable  that  less  than  3,cx)0,- 
000  workers  in  the  United  States,  even  by  the 
most  strenuous,  unanimous,  and  successful 
effort,  can  cause  average  wage  rise  for  the 
whole  38,000,000  gainful  workers?  Is  it  rea- 
sonable, even  though  the  less  than  3,000,000 
organized  unionists  unanimously  and  deliber- 
ately restricted  their  own  output  (and  this  is 
very  far  from  being  the  fact)  that  such  action 
on  their  part  would  have  any  appreciable  effect 
in  raising  the  prices  of  the  products  of  the 
entire  38,000,000  gainful  workers  of  the  coun- 
try, especially  in  view  of  the  fact  that  wage 
cost  averages  considerably  less  than  forty  per 
cent  of  the  total  cost  of  production  of  all 
products  ? 

Some  of  the  most  highly  organized  craft 
unions  do  succeed  in  exercising  monopoly 
power,  securing  thereby  high  wages  and  short 
hours  for  their  members.  A  good  illustration 
of  this  may  be  taken  from  the  1907  Bureau 
wage  report,  cited  above.  The  average  hourly 
wage  rise  for  the  whole  350,000  workmen, 
there  studied,  was  shown  to  be  28.8  per  cent, 
while  the  average  hourly  wage  rise  of  the 
45,537  members  of  the  powerful  unions  in  the 
building  trades  was  forty-seven  per  cent.  Such 


Supply  Causes  45 


monopoly  successes  doubtless  add  to  the  cost 
of  building  and  thus  increase  the  shelter  cost 
of  living.  But  these  monopoly  successes  of  the 
few  powerful  unions  are  not  fairly  represent- 
ative of  the  successes  of  all  unions.  To  a  con- 
siderable extent  they  are  achieved  at  the  ex- 
pense of  unorganized  gainful  workers  and  of 
those  in  the  more  open  unions,  and  it  is  there- 
fore doubtful  whether  even  very  successful 
wage  activity  of  the  more  monopolistic 
unions  causes  any  rise  at  all  in  the  general 
wage  level. 

Such  considerations  as  these  make  it  mani- 
festly unconvincing  to  assert  that  the  general 
rise  of  prices,  in  the  wide  range  of  goods,  is 
due  primarily,  or  even  appreciably,  to  the  ac- 
tivity of  labor  unions. 

6.  Excessive  Transportation  Rates 

It  is  sometimes  alleged  that  high  railway 
freight  rates  explain  rising  cost  of  living  in 
the  United  States,  Taking  into  account  all 
kinds  of  freight  traffic,  the  facts  seem  to  make 
it  clear  that  this  charge  against  the  railways 
does  not  hold.  Reducing  freight  receipts  to 
the  average  amount  received  per  ton  of  freight 
carried  one  mile,  this  table  results : 


46 


The  Cost  of  Living 


Average  Freight  Receipts  per  Ton  Mile 

IN    THE 

United  States 

Receipts  in  Cents              Receipt 

s  in  Cents 

Year 

per  Ton  Mile           Year 

per  Ton  Mile 

Average 

1890  to  1899 

.8402                     1904 

.780 

1896 

.806                       190S 

.766 

1897 

.798                       1906 

.748 

1898 

.753                       1907 

.759 

1899 

.724                       1908 

.754 

1900 

.729                       1909 

.763 

1901 

.750                       1910 

•753 

1902 

•757                        19" 

•757 

1903 

763                       •1912 

.744 

From  this  table  dt  is  seen  that  the  average 
ton  mile  freight  receipt  of  United  States  rail- 
ways was  in  19 12,  .744  cents.  This  was  lower 
than  the  average  receipt  per  ton  mile  in  any 
year  since  1890,  excepting  only  the  years  1899 
and  1900.  The  19 12  figure  was  less  than  three 
and  one-half  per  cent  higher  than  the  figure 
for  the  lowest  year,  1899,  and  it  was  nearly 
eleven  and  one-half  per  cent  lower  than  the 
average  receipt  per  ton  mile  during  the  decade 
from  1890  to  1899  inclusive.  That  is,  the 
railways  carried  all  of  their  freight  in  1912  at 
a  charge  averaging,  for  each  ton  carried  a 
mile,  eleven  and  one-half  per  cent  less  than 
they  were  receiving  in  the  nineties  while  gen- 
eral  commodity    was    selling    wholesale    for 


Supply  Causes  47 


nearly  thirty-four  per  cent  more,  in  1912,  than 
during  the  nineties. 

Even  if  railway  freight  charges  had  con- 
siderably advanced  during  this  rising  price 
period,  the  effect  upon  general  wholesale  or 
retail  prices  would  be  very  slight.  Detailed 
studies  of  the  marketing  costs  for  such  items 
as  butter  and  cheese,  produced  in  Minnesota 
and  marketed  in  New  York  City,  show  that 
the  charges  for  transportation  from  Minnesota 
to  New  York  City  average  from  four  to  seven 
per  cent  only  of  the  retail  prices  of  these  goods 
in  the  New  York  City  market.  For  a  wide 
range  of  finer  manufactured  goods,  the  freight 
charges  for  the  same  haul  averaged  less  than 
one  per  cent  of  the  price  to  the  final  consumer. 

Particular  railway  rates  may  have  bearing 
in  raising  the  prices  of  particular  commodities 
in  particular  markets,  but  when  the  facts  are 
assembled  in  the  large,  the  railway  charges  per 
ton  mile  have  lowered  slowly,  but  steadily, 
since  1890,  and  railway  charges  are,  in  gen- 
eral, a  very  small  fraction  of  the  final  price 
of  goods. 

7.  High  Protective  Tariff 

Is  there  justification  for  the  widely  preached 
doctrine  that  the  high  protective  tariff  has 


48  The  Cost  of  Living 

caused  the  rising  prices  in  the  United  States  ? 

A  high  protective  tariff  accounts  for  a  some- 
what higher  level  of  prices,  for  many  of  the 
protected  articles,  than  would  obtain  if  the 
duties  were  lower  or  were  altogether  removed. 
But  this  is  far  from  saying  that  the  high  duties 
under  the  Dingley  and  the  Payne-Aldrich 
revenue  acts  account  for  the  fairly  steady  price 
rise  of  the  last  eighteen  years. 

Those  who  claim  that  the  tariff  is  the  cause 
of  generally  rising  prices  are  confronted  with 
such  facts  as  these,  difficult  to  harmonize  with 
their  theory : 

(a) — Great  Britain  has  no  protective  duties, 
yet  British  prices  have  risen  generally  during 
this  same  period  of  eighteen  years. 

{b) — The  United  States  sat  in  the  shadow 
of  the  Civil  War,  speaking  in  tariff  terms,  until 
the  fall  of  19 1 3.  During  all  that  period  the 
protective  duties  were  high  and  many.  The 
middle  nineties,  under  the  ill-starred  Wilson 
act,  were  hardly  an  exception,  and  certainly, 
apart  from  the  three  years  of  that  act's  life, 
high  protection  was  the  deliberate  and  cher- 
ished policy  of  the  United  States  from  the 
middle  seventies  until  the  Underwood-Sim- 
mons act  became  law.    Yet  from  1876  down 


Supply  Causes  49 


to  1896  the  tendency  of  general  prices  was 
downward ! 

(c) — Some  of  the  great  rises  have  occurred 
in  the  prices  of  such  articles  as  wheat,  oats, 
and  rye,  only  nominally  protected,  and  lumber 
where  the  two  dollars  per  thousand  feet  was  a 
very  low  rate. 

{d) — Commodity  prices  varied  widely  while 
tariff  rates  remained  substantially  uniform. 
Thus,  some  items  of  lumber  rose  in  price 
nearly  one  hundred  per  cent  while  the  tariff 
rates  stood  still  or  were  reduced.  Wheat, 
during  a  decade  of  protection,  ranged  from  a 
yearly  average  price  of  only  .5587  per  bushel, 
in  1894,  to  1904's  average  price  of  $1,039  P^J* 
bushel.  It  bids  fair,  this  year  of  191 5,  pri- 
marily owing  to  the  wholly  abnormal  war 
conditions,  to  set  the  high  average  gold  price 
of  all  of  its  history,  although  it  is  now  alto- 
gether free  from  any  duty! 

High  protective  duties  doubtless  cause 
American  consumers  to  pay  higher  rates  for 
many  protected  goods  than  they  would  have 
to  pay  if  the  duties  were  lowered  or  abolished, 
but  this  differential  would  remain  whether  the 
general  level  of  prices  were  high  or  low.  That 
is,  American  consumers  probably  had  to  pay 


so  The  Cost  of  Living 

somewhat  higher  prices  in  1898,  1899,  and 
1900  for  many  protected  goods  than  they 
would  have  had  to  pay  with  the  duties  abol- 
ished and  yet  the  general  price  level  was  very 
low  in  those  years. 

There  is  nothing  whatever  to  show  that 
American  consumers  had  to  pay  any  higher 
price  differentials  because  of  protective  duties 
in  1905,  1906  and  1907  than  in  1898,  1899 
and  1900  and  yet  the  general  price  level  in 
1 905- 1 907  was  something  like  thirty  per  cent 
higher  than  in  1898- 1900.  The  rates  of  duty 
were  precisely  the  same  for  both  periods.  High 
protectionism,  all  of  the  time  the  high  pro- 
tection remains,  accounts  for  somewhat  higher 
prices  for  certain  articles  which  are  effectively 
protected.  It  appears  to  fail  altogether  to 
account  for  the  thing  men  the  world  over  are 
now  trying  to  explain,  namely,  the  steady  rise 
in  the  general  price  level  through  a  long  period 
of  years. 

8.  The  Trusts 

The  tariff  system  is  sometimes  thought  to 
be  responsible  indirectly  for  the  rise  of  prices 
because  it  has  fostered  trusts.  The  argument 
is  that  back  of  the  tariff  walls  were  rich  oppor- 
tunities for  domestic  manufacturers.     Many 


Supply  Causes  51 


firms  sought  the  profits  of  this  lucrative  field. 
To  avoid  the  heavy  producers'  loss  in  the  bitter 
competition  which  followed,  great  industrial 
combinations  were  formed.  But  once  these 
approximate  national  monopolies  were  formed, 
they  were  able  to  take  full  advantage  of  the 
tariff  protection.  The  only  safeguard  the 
home  consumer  had  had  against  excessive 
prices,  because  of  the  tariff  barriers,  was 
genuine  competition  between  domestic  pro- 
ducers. Such  competition  removed,  the  result- 
ant domestic  monopoly  could,  if  it  desired,  add 
the  full  tariff  differential  in  making  up  its 
domestic  price  list.  It  might  even  deliberately 
load  fixed  charges  upon  home  consumers  and 
sell  goods  abroad  at  much  cheaper  rates.  The 
tariff,  then,  is  said  both  to  hasten  the  form- 
ation of  trusts  and  to  make  possible,  and  there- 
fore actual,  excessive  price  levies  by  them. 
This  is  said,  but  is  it  true?  Have  the  great 
industrial  combinations  raised  their  prices  out 
of  all  proportion  to  the  general  rise  in  prices? 
Are  prices  higher  under  trust  control  than  they 
would  be  if  there  were  no  trusts? 

Perhaps  to  the  man  in  the  street  the  answer 
to  any  of  these  questions  is  a  pat  one.  Has 
not  the  American  eagle  been  consistently 
screaming  at  the  trusts  for  twenty-five  years? 


I 


52  The  Cost  of  Living 

Would  any  sane  American  presume  to  accuse 
a  trust  of  doing  any  good?  Of  course  trusts 
are  pushing  up  the  prices.  All  of  them  are 
doing  it  and  doing  it  everywhere,  and  they 
drive  prices  as  high  as  they  possibly  can.  Why, 
what  does  any  one  suppose  a  trust  is?  Does 
anyone  mistake  it  for  an  organized  public 
philanthropy?  Did  it  not  labor  to  achieve  its 
monopoly  power  exactly  that  it  should  make 
the  ultimate  consumer  pay  all  the  traffic  will 
bear?  Our  interrogating  friend  scarcely 
tarries  for  answers,  his  Socratic  case  against 
the  trusts  seems  to  him  so  obvious.  The  one 
question  he  appears  never  to  ask  is  the  scien- 
tific one — What  are  the  facts? 

It  seems  to  be  fairly  clear  that  trusts  are 
cost  cheapeners.  In  his  study  of  trust  prices 
made  for  the  Industrial  Commission,  Profes- 
sor Jeremiah  W.  Jenks  detailed  the  price  his- 
tories of  the  so-called  Oil,  Whisky,  Tin  Plate, 
Sugar,  Steel,  and  Wire  Trusts.  This  study 
showed  that  trusts  have  increased  the  profit 
margin  above  that  which  did  obtain  and  which 
probably  would  obtain  now  under  competitive 
production.  But  the  increased  profit  margins 
were  probably  fully  accounted  for  and  more 
by  the  cheapened  costs  under  nationally  cen- 
tralized control  of  production.     Actual  prices 


Supply  Causes  53 


might  even  be  lower  than  under  competition 
and  the  trust  still  get  a  larger  profit  differential. 

Price  records  do  not  seem  to  sustain  the 
popular  belief  that  trusts  have  arbitrarily  and 
ruthlessly  used  their  whole  price-raising  power 
to  extort  further  gains  than  those  effected  by 
their  cost-cheapening.  No  four  among  the 
great  trusts  of  the  country  have  been  more 
persistently  pilloried  in  the  high  prices  guess- 
ing contest  than  the  so-called  Sugar,  Beef,  Oil, 
and  Steel  Trusts.  Our  man  of  the  street  who 
is  ready  to  bombard  anyone  with  long  strings 
of  such  hard  questions  as  are  attributed  to 
him  above,  will  fairly  purple  with  rage  at  the 
mere  mention  of  this  quartet  of  octopi. 

In  its  tables  of  the  American  wholesale 
prices  of  over  250  commodities,  the  Fed- 
eral Bureau  of  Labor  Statistics  includes  prices 
of  sugar,  beef,  oil,  and  steel.  Its  last  publica- 
tion, cited  in  Chapter  I,  covers  such  prices 
from  1890  to  191 3  inclusive. 

Granulated  sugar  is  one  of  the  very  few 
articles  in  the  whole  list  which  sold  in  the  year 
191 3  actually  more  cheaply  than  it  sold  on  the 
average  for  the  base  decade  1890-99.  Its 
relative  figure  for  191 3  was  90.4;  i.  e.,  it  was 
ten  per  cent  cheaper  in  191 3  than  it  had  been 
during  the  nineties.     Eight  of  the  thirteen 


54  The  Cost  of  Living 

years  since  1900,  the  relative  figure  for  this 
sugar  has  been  above  its  average  price  for  the 
nineties,  but  at  the  highest,  in  191 1,  it  was  only 
1 12.8.  These  figures  should  be  contrasted 
with  the  figures  for  all  commodities  in  the 
table,  the  figures  which  represent  the  trend  of 
general  prices.  For  19 13  this  figure  was 
135.2.  In  191 1  it  was  129.2.  That  is  to  say, 
in  1913,  when  general  commodity  was  whole- 
saling 55.^  per  cent  higher  in  price  than 
during  the  nineties,  sugar  was  wholesaling 
nearly  ten  per  cent  lower,  and  in  191 1,  when 
sugar  touched  its  highest  annual  average  dur- 
ing the  whole  period  of  rising  prices,  it  was 
less  than  thirteen  per  cent  above  its  average 
wholesale  price  in  the  nineties  although  gen- 
eral commodity  was  over  twenty-nine  per  cent 
above  its  average  price  for  the  nineties. 

Again,  during  five  of  the  years  since  1900, 
granulated  sugar's  wholesale  price  has  aver- 
aged less  than  it  did  for  the  nineties,  reaching 
its  lowest  point  in  1913  at  nearly  ten  per  cent 
below.  On  the  other  hand,  the  average  whole- 
sale price  of  the  whole  252  commodities  has 
remained  well  above  the  average  of  the 
nineties  every  year  since  1900,  its  lowest 
record,  108.5,  coming  at  the  very  first  year 
of  the  period,  1901,  and  with  an  almost  steady 


Supply  Causes  55 


rise,  its  record  mounting  to  115.9  in  1905, 
131.6  in  1910,  and  reaching  zenith  at  135.2 
in  the  very  last  year  of  this  rising  price  era, 

1913- 

In  1908  the  Federal  labor  experts  published 
the  retail  prices  of  thirty  principal  food  ar- 
ticles. In  this  list  cofifee,  prunes,  and  sugar 
(epitomizing  memorable  college  boarding- 
house  menus)  were  the  three  notable  exceptions 
out  of  the  thirty.  These  were  even  cheaper 
in  1907  than  they  had  been  in  the  nineties, 
while  all  the  twenty-seven  others,  over  half  of 
them  free  from  trust  control,  had  risen  from 
four  and  five-tenths  per  cent  to  fifty-seven  and 
three-tenths  per  cent  and  averaged  twenty- 
one  per  cent  higher  in  price  than  in  the  nineties. 
So  also  with  the  late  Federal  reports  on  retail 
prices  cited  in  the  first  chapter.  Of  the  fifteen 
common  food  articles  there  listed,*  granulated 
sugar,  alone,  in  December,  1913,  was  cheaper 
than  it  had  been  in  the  nineties,  cheaper  by 
five  and  nine-tenths  per  cent.  All  fourteen 
other  listed  foods  were  much  higher,  ranging 
from  the  26.1  per  cent  rise  in  wheat  to  the 
150.2  per  cent  rise  of  eggs.    Clearly,  the  facts 

*  Note  that  the  table  in  Chapter  I,  p.  4,  gives  the  av- 
erage prices  for  the  entire  year  1913,  while  the  above 
figures  are  for  a  definite  date,  December  15,  1913. 


56  The  Cost  of  Living 

exonerate  the  Sugar  Trust  from  a  charge  of 
forced  high  prices. 

The  price  returns  for  fresh  beef  and  hams 
in  the  Federal  report  on  wholesale  prices,  seem, 
at  first  and  isolated  view,  to  justify  the  charge 
that  this  trust  has  forced  prices  upward.  In 
1913  fresh  beef  wholesaled  at  162.4  and 
smoked  hams  at  168.9  ^s  compared  with  100, 
in  each  case,  for  the  nineties.  In  contrast  with 
the  averaged  figure  for  all  commodities  in 
1913,  135.2,  these  beef  and  ham  prices  show 
nearly  double  the  rise.  When,  however,  the 
patient  searcher  for  essential  facts  turns  back 
a  few  pages  in  the  same  report,  he  may  be  sur- 
prised to  learn  that  "steers,  choice  to  prime" 
are  recorded  for  1913  at  167.8  and  "steers, 
good  to  choice"  at  179.7,  while  "hogs,  heavy" 
are  recorded  at  189.6  and  "hogs,  light"  at 
191. 2. 

The  prima  facie  price  case  against  this  beef 
trust,  which  seemed  so  clear  when  meat  prices 
alone  were  considered,  is  not  only  destroyed, 
but  to  an  appreciable  degree  it  is  reversed, 
when  the  live  stock  figures  are  coordinated 
with  the  meat  figures.  A  business  concern 
seems  fairly  free  from  the  guilt  of  price 
extortion,  even  though  it  be  charging  62.4  per 
cent  higher  prices  for  a  product,  when  it  is 


Supply  Causes  57 


compelled  to  pay  from  67.8  per  cent  to  79.7 
per  cent  more  to  secure  the  raw  material  for 
this  product,  or  in  the  second  case,  even  though 
it  be  charging  68.9  per  cent  more  for  a  product, 
when  it  is  compelled  to  pay  from  89.6  per  cent 
to  91.2  per  cent  more  for  the  raw  material  of 
this  second  product. 

Correlating  crude  and  refined  oil  prices 
gives  a  case  similar  to  that  for  beef  prices, 
similar  but  still  more  favorable  to  the  trust. 
Water-white  refined  petroleum  is  recorded  as 
selling  wholesale,  in  1913,  on  the  average  38.5 
per  cent  higher  than  in  the  nineties,  or  at  a 
price  advance  slightly  greater  than  that  for 
general  commodity  35.2  per  cent.  But  crude 
petroleum,  raw  material  for  this  refined  prod- 
uct, averaged,  wholesale,  169.2  per  cent  higher 
in  19 1 3  than  in  the  nineties,  that  is,  in  actual 
dollars  and  cents,  it  was  selling  for  an  average 
of  $2.45  per  barrel  in  19 13,  whereas  its  aver- 
age price  for  1890- 1899  was  only  ninety-one 
cents  per  barrel. 

The  Steel  Trust  has  not  varied  its  listed 
price  for  steel  rails,  $28  per  ton,  since  the 
formation  of  the  trust  in  1901.  As  samples 
of  other  products  it  controlled,  in  191 3,  steel 
sheets,  black,  Number  Twenty-seven,  listed  on 
the  average  at  97.8,  steel  billets  at  119.8,  cut 


58  The  Cost  of  Living 

nails  at  96.9,  wire  nails  at  84.1,  and  barbed 
wire  at  91.4.  And  it  is  noteworthy,  too,  that 
even  in  the  case  of  steel  billets,  where  the 
price  in  191 3  is  recorded  as  19.8  per  cent 
higher  than  in  the  nineties  on  the  average,  the 
prices  in  1899  and  in  1900,  the  years  imme- 
diately before  the  forming  of  this  trust,  are 
recorded  as  averaging  respectively  44.6  per 
cent  and  16.4  per  cent  higher  than  the  nineties' 
averages.  Similar  comparisons  made  on  the 
other  items  accentuate  the  relatively  low  prices 
of  steel  trust  product  in  the  year  19 13,  the 
year  of  highest  averaged  prices  for  all  com- 
modities. For  example,  steel  rails  listed  at  an 
average  of  $32,2875  per  ton  the  year  before 
the  trust  was  formed  and  are  therefore  selling 
about  thirteen  per  cent  cheaper  in  191 3  and 
under  this  trust's  control  than  they  were  selling 
before  the  trust  was  formed,  and  black  steel 
sheets  recorded  at  97.8  in  19 13  are  recorded 
at  130.8  for  1900. 

When  it  is  kept  in  mind  that  these  four 
great  business  organizations  are  compelled  to 
pay  higher  prices  for  their  raw  material, 
higher  wages  and  higher  taxes  than  they  had 
to  pay  in  the  nineties,  these  price  returns,  in 
two  of  the  four  cases  actually  lower  for  19 13 
than  for  the  nineties,  seem  to  be  remarkably 


Supply  Causes  59 


the  reverse  of  the  popular  belief.  Surely  there 
is  nothing  here  recorded  which  indicates  that 
the  trusts  are  responsible  for  the  general  price 
rise. 

This  conclusion,  sustained  by  the  price 
records,  is  by  no  means  a  justification  of  the 
level  of  prices  maintained  by  trusts.  It  affirms 
merely  that  the  trusts  have  not  played  an  im- 
portant role  in  the  drama  of  the  rising  cost 
of  living.  The  essential  trust  problem,  from 
the  viewpoint  of  the  consumer,  is  that  of  com- 
pelling or  of  inducing  the  trusts  more  liberally 
to  share  with  the  public  the  cost-saving  gains 
of  industrial  combination.  There  has  been, 
thus  far,  probably  very  little  of  such  sharing; 
the  trusts  have  retained  for  themselves  most 
of  their  considerable  cost-saving  gains.  But 
it  appears  that  they  have  not,  in  addition,  arbi- 
trarily advanced  their  prices  more  rapidly  than 
general  prices  have  advanced  throughout  the 
country. 

There  are  occasional  instances  of  exorbitant 
price  levies  by  local  consolidations,  such  as  the 
so-called  Milk  Trust  and  Ice  Trust  of  New 
York  City.  Such  organizations  sometimes 
have  taken  murderous  toll  of  the  city's  poor. 
They  are,  however,  strictly  local  combinations. 
However  exorbitant  their  forced  price  rises 


6o  The  Cost  of  Living 

may  be,  the  efifects  upon  the  general  price,  even 
of  their  own  kind  of  commodities,  the  country 
over,  are  very  slight  and  their  effects  upon  the 
general  price  of  all  commodity,  the  country 
over,  can  be  but  infinitesimal. 


CHAPTER  IV 

DEMAND  CAUSES 

THE  alleged  causes  of  rising  prices  which 
stimulate  demand  if  they  are  real  causes 
deserve  careful  consideration. 

/.  Increasing  Population  and  Immigration 

Treating  these  alleged  demand  causes  in  the 
order  suggested  at  the  close  of  chapter  two, 
the  first  query  is:  Does  population  growth, 
by  native  increase  or  by  immigration,  so  in- 
crease demand  for  goods  as  to  cause  rise  in 
prices  ? 

The  steady  growth  of  population  is  one  of 
the  remarkable  social  facts  of  the  world.  The 
few  figures  here  given  are  representative  of 
population  returns  wherever  records  have  been 
kept: 

POPULATION  GROWTH  OF  LEADING  NATIONS 

England  and  Wales — 1801,  8,892,536;  1901,  32,527,843; 
191 1,  36,070,492. 

France — 1801,  27,344,003;   1866,  38,067,064;   191 1,  39,- 
601,509. 

German    Empire — 1816,    29,831,396;    1900,   56,367,178; 
1910,  64,925,993. 

61 


62  The  Cost  of  Liznng 

Russia — 1796,  36,ooo,cx)o;  1897,  129,209,297;  191 1,  167,- 
003,400. 

Italy— 1816,  18,383,000;  1901,  32,475,000;  191 1,  34,671,- 
377- 

India — 1861,  196,000,000;  1901,  231,605,990;  191 1,  244,- 
267,542. 

Canada — 1801,  240,000;  1901,  5,371,315;  191 1,  7,204,838. 

United  States— 1790,  3,929,214;  1900,  75,994,575;  1910, 
91,972,266. 

With  the  exception  of  France,  where  the 
population  has  increased  only  slightly  in  the 
past  fifty  years,  the  other  leading  European 
states  appear  to  be  growing  steadily  and  fairly 
rapidly.  The  population  of  England  and 
Wales  and  of  Russia  multiplied  by  more  than 
four  in  a  little  more  than  a  hundred  years, 
and  the  population  of  the  territory  now  in  the 
German  Empire  multiplied  by  nearly  five  in 
less  than  a  century. 

Nothing  but  untrustworthy  estimates  are  at 
hand  for  the  population  of  China,  but  the 
censuses  taken  in  India  since  1861  show  that 
even  in  the  crowded  east,  subject  as  it  is  to 
the  dreaded  famines  and  plagues,  the  popula- 
tion has  increased  about  twenty-five  per  cent 
in  half  a  century. 

The  most  striking  increases  naturally  occur 
in  the  new  western  world  and  are  illustrated 
in  the  table  by  Canada  and  the  United  States, 


Demand  Causes  63 

whose  populations  have  multiplied  respectively 
by  twenty-nine  and  twenty-three  within  the 
table  periods. 

The  population  increase  for  the  last  census 
decade  does  not  suggest  any  retardation  in 
growth  as  decades  pass.  For  the  few  coun- 
tries listed,  the  absolute  increase  of  the  last 
decade  totaled  over  80,000,000.  If  other  lands 
than  those  here  listed  are  growing  proportion- 
ately, then  the  human  family  is  increasing  at 
the  rate  of  perhaps  200,000,000  a  decade. 
Such  great  increases  naturally  suggest  the 
possibility  that  the  world  may  be  getting  so 
densely  populated  that  diminishing  returns  for 
given  human  labor  will  force  rising  cost  of 
living. 

A  little  reflection,  however,  will  show  that 
increasing  population  is  not  a  causal  explana- 
tion of  the  recent  world  price  rise,  which  has 
continued  for  less  than  twenty  years.  The 
little  State  of  Rhode  Island  had  only  224,326 
people  in  its  largest  city  in  19 10,  and  only 
51,622  in  its  next  largest.  While  it  is  essen- 
tially a  manufacturing  state,  it  still  has  wild 
country  lands  and,  along  with  its  sister  states, 
it  laments  its  abandoned  farms.  It  does  not 
appear  overcrowded,  and  yet,  if  all  the  con- 
tinental United  States  were  as  densely  popu- 


64  The  Cost  of  Living 

lated,  the  United  States  would  contain  a  popu- 
lation equal  to  the  present  population  of  the 
whole  world.  When  the  people  of  Massachu- 
setts, which  reported  a  density  of  418.7  people 
per  square  mile  in  19 10,  and  the  people  of 
Rhode  Island,  with  a  population  density  of 
508.5,  can  live  in  any  kind  of  comfort,  it  seems 
premature  to  attribute  serious  consequences 
from  population  growth  of  the  past  two 
decades  to  the  people  of  the  whole  United 
States,  which  averaged  only  30.9  people  to  the 
square  mile  in  1910,  and  only  thirteen  people 
to  the  square  mile  on  its  western  2,000,000  of 
square  miles.  W'hen  the  people  of  England 
and  Wales,  with  a  population  density  of  618 
per  square  mile,  and  the  people  of  Belgium, 
with  a  population  density  of  652,  can  live  in 
any  kind  of  comfort,  it  seems  unconvincing  to 
explain  the  world's  rising  prices  by  the  popu- 
lation increases  of  the  past  twenty  years,  re- 
membering that  the  habitable  world  population 
density  does  not  average  above  thirty  to  the 
square  mile  and  that  whole  continents  fall  far 
below  this;  e.g.,  Australia,  density,  2.31; 
South  America,  density,  5.10;  North  America, 
13.68,  and  Africa,  density,  14.76. 

To  put  a  phase  of  this  argument  in  another 
form,  the  resources  of  the  United  States  are 


Demand  Causes  65 

yet  rich  enough  so  that  admitted  able-bodied 
immigrants,  once  adjusted  to  the  industrial  life' 
of  the  country,  are  able  to  produce  appreciably 
more  than  they  consume.  This  means  that 
every  such  immigrant  aids  towards  increasing 
the  supply  of  goods  more  than  he  adds  to  the 
demand  for  goods.  If  present  immigration  to 
the  United  States,  then,  has  any  appreciable 
effect  on  prices  of  goods,  that  effect  tends  to 
register  lower  prices  and  not  higher  prices  for 
those  goods. 

2.  Speculation 

Speculation  is  sometimes  cited  as  a  cause  of 
rising  prices.  The  type  of  speculation  in  mind 
is  the  Wall-Street,  Chicago- Pit  variety.  In  the 
sensational  strife  between  those  who  try  to 
corner  the  market  and  their  opponents,  tens  of 
thousands  of  shares,  or  hundreds  of  thousands 
of  bushels,  are  bought  and  sold  recklessly.  The 
steady  buying  of  the  one  seeking  a  corner 
drives  the  price  of  wheat  up  and  up  until  every 
newspaper  in  the  land  is  headlining  the  pit 
operations  and  is  commenting  upon  the 
dwindling  size  of  the  poor  man's  loaf  or  its 
rising  price.  Yet  notable  commodity  corners 
come  seldom.  If  at  all  successful,  their  success 
is  due  to  prevision  on  the  part  of  the  corner 


66  The  Cost  of  Limng 

builder  and  not  to  the  fact  that  the  corner 
building  has  had  anything  at  all  to  do  with  the 
actual  supply  and  demand  of  the  commodity, 
when  an  entire  market  year  is  considered. 

A  successful  corner  in  a  commodity  operates 
much  as  cold  storage.  It  distributes  the  sup- 
ply somewhat  differently  through  the  year,  but 
it  in  no  way  decreases  the  supply  for  that  year. 
It  may  withhold  from  the  millers,  during  the 
corner-producing  fight,  some  wheat  which 
would  otherwise  have  been  ground  by  them 
during  that  time,  but  on  the  other  hand,  when 
the  corner  fight  ends,  whether  in  the  success 
or  in  failure  of  the  corner,  the  withheld  wheat 
must  then  be  marketed.  This  necessitates  an 
increase  of  the  wheat  supply  in  the  months 
immediately  after  the  corner  ends,  above  what 
that  supply  for  those  months  would  have  been, 
and  such  increase  will  be  exactly  equal  to  the 
amount  of  wheat  which  had  been  withheld  by 
the  operators  from  regular  channels  of  wheat 
consumption  during  the  weeks  or  months  in 
which  cornering  operations  went  on.  That  is, 
the  artificial  demand  created  by  a  corner  is 
temporary.  Historic  instances  of  successful 
corners  in  wheat  clearly  show  this. 

The  famous  comer  achieved  by  "Old 
Hutch,"  in  September,  1888,  drove  the  price 


Demand  Causes  67 

of  wheat  to  two  dollars  a  bushel.  But  the 
price  fell  to  $1.04^^  on  the  day  after  the  fight 
ended.  Again,  in  1898,  young  Joseph  Leiter 
made  his  Napoleonic  debut  in  the  Chicago  pit 
by  engineering  a  successful  wheat  comer  and 
compelling  settlement  by  his  opponents,  in 
May,  at  $1.85  per  bushel.  Yet  the  average  price 
of  wheat  for  the  year  1898  was  88 5^  cents  a 
bushel.  That  the  cornerer  is  subject  to  the 
supply  and  not  the  supply  to  the  cornerer  is 
well  illustrated  by  the  financial  burial  of  this 
same  Joseph  Leiter  under  the  avalanche  of 
yellow  wheat  harvested  within  three  months 
after  he  had  won  his  millions  and  his  Napo- 
leonic trappings  in  the  May  corner.  Attempt- 
ing a  second  corner  by  the  same  methods  and 
with  all  the  increased  financial  strength  and 
prestige  won  by  his  May  success,  he  failed 
abjectly,  lost  far  more  than  he  had  won  in 
May,  and  all  because  he  had  not  learned  that 
even  the  great  Bonapartes  of  the  pit  are  sub- 
jects, not  lords  of  supply.  Speculative  corners 
come  so  infrequently,  and  are  so  temporary 
when  they  do  come,  that  their  effects  on  gen- 
eral rising  prices  over  a  long  period  are  wholly 
negligible. 

Another  tjrpe  of  speculation  is  the  gambling 
promoter's    type,    which    expresses    itself    in 


68  The  Cost  of  Living 

watered  stocks.  It  makes  its  winnings  by  un- 
loading the  shares  of  highly  overcapitalized 
corporations  upon  the  common  garden  variety 
of  confiding  investors  found  so  plentifully  in 
kitchens  and  in  college  faculties.  The  whole 
gamut  runs  from  lucky-dime  oil  wells,  Eldo- 
rado gold  mines,  sure-thing  rubber  plantations 
and  520  per  cent  Miller  syndicates  up  to  ex- 
travagant capitalization  of  the  elusive  "good- 
will "  factor  in  otherwise  reasonably  respect- 
able industrial  and  public  service  corporations 
and  indefensible  expansions  of  the  bonded 
obligations  of  railways.  Such  devices  have 
undoubtedly  separated  many  perfectly  and 
pathetically  innocent  investors  from  hard 
earned  savings.  They  have  enabled  some 
prowling  confidence  men  of  the  corporation 
world  to  live  regally  without  other  effort  than 
that  involved  in  concocting  and  mailing  to 
addresses  on  lengthy  "sucker  lists"  pros- 
pectuses worthy  of  Barnum,  and  follow-up 
letters,  overflowing  with  confiding  personalities 
and  winning  benevolence. 

Indirectly  this  type  of  speculation  has  prob- 
ably had  some  upward  effect  upon  prices  by 
dissipating,  in  gambler  expenditures,  funds 
which  were  intended  by  the  innocent  investors 
to  be  added  to  the  permanent,  effective  capital 


Demand  Causes  69 

of  the  country.  Had  the  effective  capital  been 
so  increased,  the  producing  world  would  be 
offering  a  larger  volume  of  products  than  it  is 
now  offering  and  prices  would  tend  to  be 
lower.  But  the  naive  argument  sometimes 
offered,  which  concludes  that  overcapitaliza- 
tion accounts  for  the  whole  rising  price  situ- 
ation, claims  a  direct  effect  and  seems  to  rest 
on  a  pure  assumption.  That  assumption  is 
that  promoters  having  largely  overcapitalized 
their  enterprises,  proceed  therefore  to  charge 
enough  higher  prices  for  their  goods  so  that 
they  may  be  able  to  pay  dividends  on  their  over 
issued  stocks.  In  other  words,  it  is  assumed 
that  a  producer  can  dispose  of  his  whole  prod- 
uct at  any  price  which  he  chooses  to  set.  This 
assumption  is  so  contrary  to  all  fact  that  it 
probably  deserves  only  mention.  The  wide 
range  of  industrial  and  rail  securities  which 
pay  little  or  no  dividends  is  factual  proof  that 
the  assumption  is  untenable.  If  all  a  corpora- 
tion had  to  do  to  get  a  price  for  its  goods  was 
to  ask  it,  why  should  it  waste  any  of  its  time 
increasing  its  stock  issues? 

There  can  be  no  doubt  that  the  United 
States  has  been  harmed  much  and  in  many 
ways,  by  the  bogus  flotations  and  lying  pro- 
motions of  its  history,  but  the  price  effects  of 


70  The  Cost  of  Living 

such  bandit  successes  are  indirect  at  the  most, 
and  much  less  important  than  they  appear  to 
some  alleged  foes  of  "the  system."  Further- 
more, it  is  worthy  of  note  that  precisely  during 
this  last  fifteen  or  eighteen  years  of  steadily- 
rising  general  prices,  the  investing  public  has 
been  unusually  wary,  the  law  has  been  made 
more  severe  and  has  been  invoked  more  freely 
and  successfully  against  fraudulent  schemes 
and  the  big-business  world  itself  has  been 
awakened  more  generally  to  admire  service- 
ableness  and  accomplishment  rather  than  mere 
shrewdness  and  acquisitive  success.  We  are 
passing  from  a  generation  of  exploiters  and 
wreckers  into  a  generation  of  cooperators 
and  builders  within  this  very  price-rising 
period. 

Neither  on  the  side  of  spectacular  corners 
nor  on  the  side  of  gambling  expansion  of  cor- 
porate securities  does  speculation  appear  to  be 
an  appreciable  cause  of  the  steady  rise  of  gen- 
eral price. 

J.  Extravagance 

Extravagance,  individual  and  social,  charac- 
terizes modern  life. 

A. —  The  rapid  building  of  great  American 
fortunes  has  developed  an  ugly  and  disgusting 


Demand  Causes  yi 

type  nicknamed  the  "spenders."  They  squan- 
der more  or  less  questionably-acquired  for- 
tunes in  peacock  efforts  to  outshine  their  neigh- 
bors and  to  dazzle  honest  folk,  who  are  com- 
pelled to  practice  economy  because  they  must 
first  earn  before  they  spend.  Perhaps  it  is 
another  indication  of  the  probable  truth  of  the 
evolutionary  story  in  its  baldest  form,  that  all 
down  through  the  economic  ranks  can  be  found 
the  aping,  covetous  admirers  of  the  spenders. 
The  ten-dollar-a-week  apprentice,  who  spends 
a  month's  income  in  "blowing"  his  whole 
crowd  at  his  club's  annual  ball,  belongs  to  the 
"hall-room  boys"  type  of  persons  found 
sprinkled  in  all  the  lower  economic  levels. 
These  are  spenders,  humble,  but  none  the  less 
extravagant. 

Extravagance  is  a  relative  thing.  It  is  liv- 
ing fully  up  to  or  beyond  one's  income,  pro- 
vided that  income  is  sufficient  to  permit  of  any 
rational  saving,  or  it  is  the  spending  of  con- 
siderable parts  of  one's  annual  income  in  silly, 
ostentatious,  sensual,  harmful  ways.  In  the 
second  form  it  may  be  seen  not  infrequently 
when  incomes  are  very  low.  It  is  gross  ex- 
travagance for  a  man  drunkenly  to  part  with 
half  of  his  week's  wages  at  the  tavern,  when 
his  children  are  hungry  and  his  wife  is  ill-clad, 


'J 2  The  Cost  of  Living 

and  all  the  more  so  if,  when  all  his  wage  is 
carefully  spent,  it  will  provide  necessities  only 
for  his  family  group. 

The  fads  of  fashion  and  the  use  of  perish- 
able stuffs  in  place  of  solid  heirloom  fabrics 
of  the  olden  days  are  forms  of  commingled 
individual  and  social  extravagance.  Nothing 
could  be  more  unintelligent  than  to  follow  the 
dictating  of  fashion  makers,  designing  persons 
in  a  double  sense.  And  yet,  follow,  the  crowd 
does.  The  "  spenders  "  are  on  the  heels  of  the 
modiste  and  a  large  part  of  the  community  is 
in  close  trail.  Simon  says  "  Pancakes "  and 
who  would  be  seen  in  any  but  a  flat,  narrow- 
brimmed  hat !  A  few  months  later  Simon  says 
"Sombreros"  and  within  a  few  days  all  pan- 
cakes are  in  the  garret  and  everyone's  hat  flops 
a  brim  the  width  of  the  church  aisle.  At  the 
opening  of  the  next  season  Simon's  ukase 
orders  "Turret  and  Spikes"  and  the  som- 
breros join  the  pancakes.  And  so  it  goes,  all 
quite  regardless  of  the  serviceability  or  the 
convenience  or  the  beauty  of  the  hat.  "One 
might  as  well  be  dead  as  out  of  fashion"  is 
the  justification  given,  and  just  because  so 
many  people  are  so  sheeplike  that  even  their 
justification  has  to  be  bromidic,  the  fashion 
makers,  who  in  recent  years  have  surely  been 


Demand  Causes  73 

the  Cubists  of  Clothing,  continue  to  concrete 
their  nightmares  into  straws,  felts,  worsteds, 
and  silks,  and  to  order  humanity  ceaselessly  to 
act  the  window  wax  model.  One  of  the  rea- 
sons, doubtless,  why  the  shoddy  substitutes  for 
genuine  goods  find  ready  sale  is  that  the  buyer 
thinks  they  and  their  surface  sheen  will  last 
at  least  as  long  as  the  fashion.  There  were 
shif tings  of  fashions  in  olden  days,  but  not 
nearly  the  same  proportion  of  the  population 
could  follow  even  if  they  would.  Swift  fashion 
change,  with  its  close  corollary  of  flimsy  fab- 
rics, dictates  today  a  form  of  extravagance 
which  both  increases  cost  of  living  and  atro- 
phies intelligence  and  taste. 

Extravagance  expresses  itself,  particularly 
in  America,  in  letting  the  palate  prevail  rather 
than  the  brain,  in  determining  the  selection  and 
preparation  of  foods.  It  expresses  itself  in  the 
contents  of  the  garbage  can,  to  which  many 
families  discard,  weekly,  enough  "odds  and 
ends"  to  provide  a  meal  or  two  of  palatable 
and  nourishing  food,  if  intelligent  thrift  but 
utilized  them.  And  here  again,  while  such 
waste  is  sometimes  ostentatiously  ordered  on  a 
sweeping  scale  by  top  layer  "spenders,"  it  is 
not  infrequent  also  among  families  of  small 
incomes. 


74  The  Cost  of  Living 

B. —  Space  permits  mention,  only,  of  strik- 
ing American  forms  of  social  extravagance : 

( I )  —  Tolerance  of  carelessly  made,  com- 
bustible buildings,  enormously  inflating  the 
annual  fire  loss  of  the  United  States  —  a  loss 
passing  the  $300,000,000  mark  in  these  years. 

(2) — Negligence  of  industrial  conditions 
and  inert  retention  of  outworn  legal  formulas, 
thereby  making  society  blameworthy  for  the 
preventable  one-quarter  to  one-half  of  the 
awful  number  of  deaths  and  accidents  charged 
to  our  American  industry  each  year  —  35,000 
deaths  and  500,000  cases  of  accidental  injury, 
one  full  army  corps  slain  and  twelve  full  army 
corps  wounded,  in  America's  industrial  war- 
fare each  year. 

(3) — The  careless  individual  and  com- 
munity disregard  of  health  and  its  necessary 
conditions,  perhaps  doubling  the  estimated  an- 
nual 2,000,000  cases  of  inevitable  sickness, 
greatly  prolonging  many  such  cases  and  caus- 
ing tens  of  thousands  of  premature  deaths 
annually. 

(4)  — The  failure  to  deal  scientifically  with 
the  conservation  of  effective  human  beings,  in- 
volved in  possible  prevention  of  criminality, 
pauperism,  and  unemployment. 


Demand  Causes  75 

( 5 )  —  The  failure  best  to  conserve  the 
publicly  and  privately  owned  resources  of  the 
nation  —  land,  forests,  minerals,  fisheries,  and 
water  rights. 

(6)  — The  disproportionate  cost  of  national 
armies  and  navies,  more  marked  in  Europe 
than  in  the  United  States,  but  most  watchfully 
to  be  held  in  check  here,  where  already  war 
charges,  past,  present,  and  future,  consume 
annually  seventy  per  cent  of  the  Federal 
income. 

(7)  — The  high  cost,  direct  and  indirect,  of 
government.  Federal,  State,  and  Local, 
through  the  lost  motion,  novice  inefficiency, 
frequent  and  radical  changes  of  policy,  and 
the  pettifogging  feudalism  so  common  in  a 
political  system  where  getting  elected  and  re- 
elected, if  possible,  and  defending  the  admin- 
istration, oftentimes  seems  to  be  the  public 
official's  chief  business. 

However,  Americans  have  not  grown  ex- 
travagant in  a  day,  either  individually  or 
collectively.  The  general  social  inventory  in 
process  during  the  past  decade  is  revealing  ex- 
travagance long  practiced,  and  is  causing  some 
of  the  social  extravagances  outlined  above  to 
be  appreciably  checked,  for  the  first  time.    Un- 


76  The  Cost  of  Living 

questionably,  America  would  be  better  off 
today  had  it  always  frugally  husbanded  its 
natural  and  human  resources  and  its  capital, 
but  evidence  does  not  appear  which  shows  that 
even  America's  serious  extravagances  and 
wastes  are  an  important  cause  of  the  rising 
general  price  of  recent  years.  Prices  fell  gen- 
erally in  the  United  States  from  the  middle 
seventies  to  the  middle  nineties,  and  yet  some 
of  the  worst  of  its  historical  extravagances 
occurred  in  that  period,  and  again  prices  are 
rising  the  world  over  today,  where  peoples  are 
spendthrift  and  where  they  are  frugal.  Un- 
usual national  extravagance  may  fairly  list  as 
a  differential  cause  —  a  factor  in  explanation 
of  the  higher  rise  of  prices  in  one  country  than 
in  another,  but  it  does  not  appear  to  be  a  basic 
explanation  of  the  general  rise  in  world  prices 
during  just  this  last  twenty  years. 

4.  Rising  Standard  of  Living 

Clearly  distinguishable  from  extravagances 
individual  and  social,  are  increasing  expendi- 
tures due  to  rising  standards  of  living.  These 
are  added  expenditures,  rationally  made  to 
secure  the  comfort  and  well-being,  to  promote 
the  health  and  happiness,  to  increase  the  effici- 
ency and  the  culture,  and  to  ennoble  the  whole 


Demand  Causes  yy 

life  of  the  individual,  the  family  group,  or  the 
community.  To  secure  finer  and  more  varied 
foods,  more  spacious  and  more  beautiful 
dwelling  places,  with  better  light,  air  and  view, 
more  varied  garments  of  better  fabric  and 
better  make,  better  and  more  extended  oppor- 
tunities for  education,  vocational  and  cultural, 
and  for  recreation,  ampler  provision  for  care 
of  the  health  and  for  insurance  safeguards 
against  inroad  of  the  living  standards  through 
sickness,  accident,  old  age  or  death,  freer  social 
interchange  with  friends  and  fuller  participa- 
tion in  the  community  life  —  civic,  educational, 
recreational,  or  religious  —  to  secure  such 
things  as  these,  increasingly,  is  to  make  life 
more  and  more  worth  living.  The  family 
group,  thus  advancing  in  the  worthier  life, 
needs  more  and  better  things  and  opportunities 
and  it  thus  increases  the  demand  for  more  and 
better  things.  Definitely  rising  living  stand- 
ards increase  the  cost  of  living,  other  things 
all  remaining  the  same. 

The  first  question  that  occurs  with  reference 
to  rising  living  standards  when  considered  in 
relation  to  the  problem  of  rising  living  cost  is, 
would  not  the  productiveness  of  a  people  rise 
much  in  proportion  to  their  rising  standards? 
If  so,  then  there  would  be  no  relation  com- 


78  The  Cost  of  Living 

pelling  rising  price.  This  is  simply  another 
form  of  the  idea  that  there  is  true  economy  in 
high  wages.  High  wages  paid  to  individual 
workmen  by  no  means  result  in  high  labor  cost 
per  unit  of  product. 

When  that  construction  company  paid  the 
American  bricklayers  $4.80  per  day,  in  gold, 
to  lay  brick  alongside  Cuban  masons  on  that 
Havana  building  some  years  ago,  the  spectator 
might  have  been  perplexed  to  understand  how 
the  contractors  could  afford  to  pay  the  Ameri- 
can masons  so  much  when  they  were  paying 
the  Cubans  only  $1.75  per  day,  and  that  in 
slightly  depreciated  silver.  His  perplexity 
would  disappear  when  he  learned  that  the 
Americans  were  laying  1,800  bricks  a  day  and 
the  Cubans  but  500.  He  would  then  note  that 
it  actually  cost  only  $2.75  to  have  the  Ameri- 
cans lay  1,000  bricks,  whereas  it  cost  $3.50  to 
have  Cubans  lay  1,000  bricks.  The  American 
masons,  by  their  greater  productivity,  more 
than  counterbalanced  their  higher  dollar  and 
cent  wage.  Even  so,  the  generally  rising 
standard  of  living  should  increase  the  pro- 
ductiveness of  a  whole  people  if  anything  more 
than  in  proportion  to  the  increased  things  de- 
manded to  satisfy  the  rising  standard.  It 
should,  therefore,  not  cause  rising  prices.   This 


Demand  Causes  79 

conclusion  applies  particularly  in  a  land  having 
as  rich  resources  as  has  the  United  States. 

The  second  query  that  occurs  with  reference 
to  rising  living  standards,  considered  as  a 
possible  cause  of  recently  rising  general  prices 
is:  Is  there  any  tangible  proof  that  living 
standards  have  been  rising  any  more  rapidly 
in  the  United  States  or  in  the  world  at  large, 
during  the  past  twenty  years  than  they  were 
rising  during  the  preceding  twenty  years? 
That  is,  the  same  query  rises  here  which  arises 
in  connection  with  consideration  of  the  retail- 
ing system,  of  the  tariff,  of  increasing  popu- 
lation, and  of  extravagance,  namely,  if  this 
is  an  important  cause  of  rising  price,  then  why 
did  prices  not  rise  from  1875  to  1896,  as  well 
as  from  1896  to  191 5? 

Living  standards  surely  rose  in  the  United 
States  from  1875  to  1896.  That  was  the 
double  decade  which  ended  the  pioneering 
hardships  and  peopled  practically  the  last  of 
the  desirable  arable  free  public  land.  That 
was  the  double  decade  which  equipped  the 
farmers  of  the  country  with  a  whole  range 
of  labor-saving,  cost-cheapening  agricultural 
implements.  That  was  the  double  decade 
which  expanded  the  use  of  the  telegraph  and 
introduced   the   incandescent   light,   the   tele- 


8o  The  Cost  of  Living 

phone,  the  bicycle,  the  automobile,  and  the  re- 
frigerator car.  That  was  the  double  decade 
which  opened  with  the  great  Centennial  Expo- 
sition that  proved  to  the  world  that  America 
had  marvelously  recovered  from  the  indus- 
trial derangements  of  the  Civil  War  time. 
That  was  the  double  decade  which  saw  the 
great  organizations  of  labor,  the  Knights  of 
Labor  and  the  American  Federation  of  Labor, 
develop  high  power,  expressive  of  the  rising 
standards  of  American  laborers. 

Surely  that  double  decade  which  saw  the 
public  school  system  of  the  country  widely  ex- 
tended, which  changed  from  the  iron  to  the 
steel  rail,  which  greatly  enlarged  and  perfected 
the  whole  railway  system,  which  reaped  the 
early  fruits  of  the  great  Mississippi  Valley  and 
the  cattle  grazing  plains  —  surely  such  a  double 
decade  was  one  of  rising  living  standards  in 
the  United  States.  Yet,  during  that  double 
decade  from  1875  to  1896,  the  general  ten- 
dency of  prices  was  steadily  downward. 

If  the  general  effect  of  a  distinctly  rising 
standard  of  living  is  to  increase  the  produc- 
tiveness of  a  people  even  more  rapidly  than 
the  standard  rises  and,  therefore,  the  general 
effect  is  toward  lowering  of  prices,  then  the 
rising  standard  in  America  from  1875  to  1896 


Demand  Causes  8i 

was  probably  cooperating  with  some  other  fac- 
tors to  cause  the  lowering  of  prices  which 
actually  did  occur  in  that  period.  If  that  is 
correct  analysis,  then  the  rising  standards  of 
the  years  since  1896  must  also  have  tended 
towards  lowering  of  prices.  But  general  prices 
have  actually  and  steadily  and  considerably 
risen  during  this  recent  period.  Therefore 
some  causes  of  generally  rising  prices  must  be 
powerful  enough  not  only  to  cause  the  rise 
which  has  occurred,  but  also  to  overcome  the 
distinct  tendency  downward  due  to  the  increas- 
ing population  and  the  rising  living  standards. 
Our  analysis  thus  far  has  left  us  one  cause 
only  which  clearly  makes  for  rising  prices,  and 
that  is,  the  disappearance  of  the  richest  na- 
tional resources.  But  the  increasing  popula- 
tion and  the  rising  living  standards  seem  prob- 
ably both  of  them  to  be  working  against  this 
one  cause  of  rising  prices.  We  evidently  have 
not  reached  a  satisfactory  cause,  adequate  to 
explain  this  general,  steady  world-wide  rise  in 
prices,  but  we  have  at  least  come  to  see  what 
we  must  find  if  we  do  find  an  adequate  cause. 
It  must  be  a  cause  which  operates  throughout 
the  com.mercial  world.  It  must  be  a  cause 
which  has  operated  steadily  for  some  eighteen 
or  twenty  years  at  least.    It  must  be  a  powerful 


82  The  Cost  of  Living 

cause,  for  aided  only  by  relative  exhaustion  of 
resources  and  opposed  by  increasing  popula- 
tion and  rising  living  standards,  it  must  ex- 
plain an  average  wholesale  price  rise  in  the 
United  States  of  over  fifty  per  cent  from  1896 
to  1 9 14.  And  it  must  be  a  cause  the  effects  of 
which  can  be  factually  harmonized  with  a 
steady  tendency  downward  of  general  prices 
from  1875  to  1896  as  well  as  with  a  steady 
tendency  upward  of  general  prices  since  1896. 
Our  analysis  up  to  the  present  has  at  least 
surveyed  the  ground  for  us,  and  has  shown 
us  what  tests  our  adequate  cause  must  meet. 

5.  Increased  Gold  Supply 

Only  one  alleged  cause  remains  to  be  con- 
sidered—  the  increased  gold  supply.  The 
steady  and  great  increase  in  the  world's  annual 
gold  product  is  one  of  the  marked  things  in 
the  world  of  industry  during  the  past  twenty 
years.  A  table  summarizing  the  world's  gold 
production  since  the  discovery  of  America 
follows : 

World  Gold  Production  Since  1492 

Years  Gold  in  Dollars  Years  Gold  in  Dollars 

1492-1600  $  501,640,000  1899  $306,724,100 

1601-1800              1,869,120,000  1900  254,576,300 

1801-1830                288,694,000  1901  260,992,900 


Demand  Causes 

83 

Years 

Gold  in  Dollars 

Years  Gold  in  Dollars 

1831-1840 

134,841,000 

1902 

296,737,600 

1841-1850 

363,928,000 

1903 

327,702,700 

1851-1860 

1,332,981,000 

1904 

347,377,200 

1861-1870 

1,263,015,000 

1905 

380,288,700 

1871-1880 

1,150,814,000 

1906 

402,503,000 

1881-1890 

1.059,892,000 

1907 

412,966,600 

1891 

130,650,000 

1908 

442,476,900 

1892 

146,651,500 

1909 

454.059,100 

1893 

157,494,800 

1910 

455,259,800 

1894 

181,175,600 

191 1 

461,542,100 

1895 

198,763,600 

1912 

466,136,100 

1897 

236,073,700 

1913 

455,000,000 

1898 

286,879,700 

As  broader  comparisons  from  this  table, 
note  that  in  each  of  the  past  five  years  the 
world  has  produced  nearly  as  much  as  it  pro- 
duced in  the  entire  century  1500  to  1600  and 
that  the  combined  gold  product  of  the  last  five 
years  nearly  equals  the  total  product  of  three 
centuries  after  1500;  again,  production  for  any 
single  year  since  1904  is  greater  than  the  pro- 
duction of  any  of  the  first  five  decades  of  the 
nineteenth  century;  last  of  the  broader  com- 
parisons, note  that  the  product  of  three  years 
now  surpasses  the  product  even  of  that  wonder 
gold  decade  1 851- 1860,  when  the  new  Cali- 
fornian  and  Australian  fields  were  pouring  out 
their  gold,  and  that,  if  the  world  gold  produc- 
tion for  the  years  19 14  and  191 5  equals  that 
for  191 3  and  19 13,  the  twenty-six  years  since 


84  The  Cost  of  Living 

1889  will  have  produced  more  gold  than  the 
four  hundred  preceding  years  produced. 

For  the  purposes  of  the  argument  in  this 
book,  especial  attention  should  be  given  to  the 
production  since  1870.  The  1870- 1880  decade 
produced  less  than  the  preceding  decade  and 
the  1 880- 1 890  decade  product  declined  still 
more.  In  the  early  nineties  the  world  annual 
gold  product  began  to  rise.  1892  was  the  first 
year,  since  i860,  to  surpass  i860  in  output. 
From  1892  until  191 2,  excepting  only  1900 
to  1902,  there  is  a  steady  annual  increase,  never 
less  than  $1,000,000  and  mounting  as  high  as 
$50,000,000  between  1897  and  1898.  The 
excepted  years,  1900- 1902,  were  the  years 
when  war  interrupted  the  production  of  the 
South  African  gold  fields.  The  drop  of  $11,- 
000,000  from  i9i2toi9i3  may  have  been  due 
to  labor  troubles  (the  Transvaal,  owing  to  a 
miners'  strike,  fell  $5,000,000  behind  its  pre- 
vious year's  record),  or  it  may  mean  that  the 
year  191 2  is  to  be  registered  as  the  world's 
climax  year  in  this  era  of  huge  gold  production. 

Gold  is  used  in  the  arts  and  for  coinage. 
There  is  call  for  it  to  make  jewelry  and  plate, 
to  head  canes  and  umbrellas,  to  gild  weather- 
vanes  and  steeple  balls  and  to  supply  other 
craft  needs;  there  is  call  for  it  as  a  durable, 


Demand  Causes  85 

beautiful,  portable,  and  impressible  material, 
out  of  which  to  make  the  primary  money  of 
the  commercial  world.  The  whole  demand  for 
gold  is  compounded  of  these  two  calls. 

The  coinage  demand  for  gold  is  determined 
by  two  factors,  the  whole  volume  of  ex- 
changes to  be  effected  and  the  rapidity  with 
which  gold  constructively  circulates.  This 
rapidity  of  circulation  depends  upon  the  gen- 
eral monetary  and  financial  systems.  If  much 
business  is  done  on  credit  and  settlements  are 
widely  made  in  checks  and  drafts  and  if,  when 
money  is  used,  much  of  it  is  of  a  convertible 
type,  issued  in  excess  of  the  primary  money 
reserve  held  to  redeem  it,  then  one  dollar  of 
gold  may  do  many  dollars'  worth  of  business ; 
if,  in  a  given  period,  on  the  other  hand,  busi- 
ness is  largely  done  directly  for  cash  and  there 
are  few  substitutes  for  primary  money,  then 
one  dollar  in  gold  can  do  much  less  business 
within  the  given  time.  That  is,  if  gold  itself 
must  directly  effect  the  business  settlements, 
then  a  dollar  of  it  can  do  much  less  business 
in  a  given  period  than  if  a  highly  perfected 
exchange  system  allows  the  gold  largely  to 
remain  in  a  reserve,  to  redeem  a  considerably 
larger  face  value  amount  of  representative 
money  instruments. 


86  The  Cost  of  Living 

Every  perfection,  then,  in  the  exchange 
system  operates  to  increase  the  amount  of 
money  work  which  one  dollar  of  gold  can  do 
in  a  given  period.  The  general  exchange 
system  is  steadily  growing  more  and  more 
efficient,  the  systems  of  representative  money 
and  of  money  substitutes  such  as  bank  checks, 
are  being  steadily  perfected  and  more  widely 
utilized,  so  that  each  dollar  in  gold  is  being 
enabled,  as  the  years  pass,  to  do  a  larger  and 
larger  volume  of  business  within  a  given  time. 

But,  in  these  recent  years  of  huge  annual 
gold  production,  more  than  half,  and  com- 
monly two-thirds  to  three-quarters,  of  all  the 
gold  mined  each  year  goes  into  money  service. 
An  estimate  for  the  year  191 1  places  the  total 
value  of  gold  used  in  the  arts  of  the  world  at 
$164,272,700,  while  the  new  gold  product  was 
$461,542,100.  This  leaves  nearly  $300,000,000 
gold  to  go  directly  into  the  primary  money 
reserve  of  the  world. 

The  amount  of  money  work  which  can  be 
done,  then,  through  the  primary  gold  money 
of  the  world,  has  been  doubly  increasing  in 
recent  years,  because  both  the  rapidity  of  cir- 
culation has  been  increasing  appreciably  and 
the  actual  volume  of  gold  has  been  increasing 
vastly.     In  effect,  it  may  fairly  be  said  that 


Demand  Causes  87 

the  supply  of  money  has  been  enormously 
increasing  steadily  since  the  early  nineties. 

But  prices,  as  shown  in  chapter  two,  are 
reached  by  measuring  utilities  of  other  things 
in  terms  of  the  fundamental  money  thing,  gold. 
And  this  money  thing,  gold,  was  there  shown 
to  be  a  commodity,  subject  to  the  general  law 
of  commodity  value.  A  large  increase  in  its 
supply  would,  other  things  equal,  make  a  unit 
of  it  worth  less  to  men.  But,  as  shown  just 
above,  the  supply  of  it  for  money  purposes  is 
practically  increasing  in  a  double  way  — 
actually,  enormous  annual  increases  in  the  gold 
itself,  and  constructively,  through  speeding  up 
of  the  machinery  of  exchange.  A  doubly 
strong  influence,  then,  has  been  at  work  for 
the  past  twenty  years  to  make  a  unit  of  gold 
worth  less  and  less. 

The  one  offset  which  might  prevent  any  price 
record  of  this  tendency  toward  cheaper  gold 
would  be  a  steady  increase  in  the  world's  vol- 
ume of  exchanges.  Obviously,  if  the  world's 
volume  of  exchanges  —  that  is,  if  the  number 
of  barrels  of  flour,  pairs  of  shoes,  railway 
tickets,  days  of  labor,  etc.,  etc.,  etc.,  exchanged 
in  the  world's  inclusive  market  were  increas- 
ing fully  as  rapidly  as  the  ratio  of  increase  of 
gold  money  multiplied  by  the  ratio  of  increase 


88  The  Cost  of  Living 

of  the  rapidity  of  its  circulation,  then  the  de- 
mand for  money  service  would  be  increasing 
just  as  rapidly  as  the  supply  of  money  units, 
and  there  would  be  no  reason  for  any  change 
in  the  level  of  general  prices.  On  the  other 
hand,  taking  into  account  both  the  great  in- 
crease in  gold  money  and  the  increased  effi- 
ciency in  its  use,  if  the  volume  of  world  ex-  1 
changes  has  not  increased  at  all,  or  has  not  in- 
creased so  rapidly  as  has  the  number  of  money 
units  offering  to  effect  the  exchanges,  then  the 
money  units  will  be  worth  less  and  less;  that 
is,  gold  will  be  cheaper. 

If  gold  is  cheaper,  that  means  it  takes  more 
of  it  to  get  a  given  amount  of  other  things; 
but,  whenever  more  of  it  must  be  given  to  get 
a  given  amount  of  other  things,  this  is  the  same 
as  saying  that  prices  have  risen,  since  a  given 
amount  of  gold  is  arbitrarily  declared  to  be 
the  measuring  unit  {e.g.,  in  the  United  States, 
as  we  have  seen,  23.22  grains  of  pure  gold 
is  the  dollar  unit).  To  put  it  in  the  other  way, 
when  we  say  that  the  wholesale  price  of  fresh 
eggs  has  risen  from  $10  to  $20  a  crate,  we 
are  practically  saying  that  whereas  formerly 
ten  times  23.22  grains  or  232.2  grains  of  gold 
would  command  a  crate  of  eggs,  now  it  takes 
twenty  times  23.22  grains  or  464.4  grains  of 


Demand  Causes  89 

gold  to  get  a  crate  of  the  same  grade  of  eggs. 

The  fundamental  problem  of  general  change 
of  prices,  then,  deals  with  three  factors:  the 
number  of  monetary  units  and  the  rapidity  with 
which  these  units  do  the  work  of  exchanging, 
on  one  side,  and  the  total  volume  of  exchanges 
to  be  effected,  on  the  other  side.  It  is  in  clear 
evidence  that  the  number  of  gold  money  units 
hugely  and  steadily  increased  during  the  past 
twenty  years.  During  the  same  time  the  gen- 
eral machinery  of  exchange  was  greatly  im- 
proved. Unless  the  volume  of  the  world's 
exchanges  increased  proportionately  to  the 
compounding  increase  of  the  other  factors,  then 
general  prices  the  commercial  world  over  should 
have  risen.  Here  at  least,  then,  we  are  con- 
sidering the  fundamental  elements  in  price- 
making.  We  can  see  a  hypothetical  condition 
which,  if  it  obtained  actually,  would  satisfac- 
torily explain  the  rising  prices  of  the  last  twen- 
ty years. 

The  lacking  item  to  make  a  demonstration 
fully  convincing  is  an  acceptable  measuring  of 
the  volume  of  world  exchanges.  Statisticians 
have  attempted  to  do  this.  The  most  elaborate 
calculations  have  been  made  by  Professor 
Irving  Fisher.  He  has  constructed  a  table  in 
which  he  assembles,   for  the  United  States, 


90  The  Cost  of  Living 

the  recorded  volume  of  yearly  exchanges  of 
forty- four  leading  articles  in  internal  com- 
merce, the  volume  of  exports  and  imports  and 
the  amounts  of  stocks  sold.  These  three  he  se- 
lects as  direct  indicators  of  trade  volume.  In 
the  table  he  records  also  the  railroad  freight 
tonnage  and  the  pieces  of  first-class  mail  mat- 
ter carried  yearly,  as  indirect  indicators  of 
trade  volume.  Combining  the  returns  of  these 
items,  he  estimates  that  trade  volume  is  in- 
creasing annually  about  four  and  one-half  per 
cent. 

On  the  other  hand,  accounting  that  the  actual 
quantity  of  money  in  circulation  is  growing 
about  two  and  one-half  per  cent  a  year,  and 
that  each  dollar  is  becoming  steadily  more  ef- 
fective in  doing  money  work  by  reason  of  per- 
fecting and  extending  exchange  machinery,  the 
total  money  units  available  to  effect  exchanges 
are  increasing  about  seven  per  cent  a  year. 
That  is,  by  this  carefully  compounded  table 
it  is  shown  that  steadily  since  1896  the  volume 
of  United  States  business  has  been  increasing 
appreciably  less  rapidly  than  the  supply  of  cir- 
culating media  of  exchange. 

These  final  figures  from  Professor  Fisher's 
painstaking  calculations  indicate  that  taking 
into  account  the  effects  of  the  increased  sup- 


Demand  Causes  91 

ply  of  money  gold,  its  rapidity  of  circulation 
(using  this  phrase  in  a  very  broad  sense),  and 
the  volume  of  the  business  to  be  done  in  terms 
of  this  circulating  gold,  the  facts  indicate  that 
United  States  general  prices  should  have  risen 
about  two  and  a  half  per  cent  a  year  on  the 
average  since  1897.  That  is  to  say,  this  one 
last  cause,  the  increasing  gold  supply  height- 
ened by  perfecting  exchange  machinery,  ap- 
pears, through  its  monetary  effects,  to  account 
for  a  general  price  rise  of  some  forty  per  cent 
from  1897  to  19 1 3.  The  actual  wholesale 
price  rise  for  the  United  States  from  1897  to 
19 1 3  is,  by  the  Labor  Bureau's  figures,  from 
89.7  to  135.2,  a  rise  of  45.5  per  cent  on  the 
base  average,  or  of  50.07  per  cent  if  the  1897 
figures  be  taken  as  the  base.  The  increasing 
gold  supply  energized  by  perfected  exchange 
machinery  in  its  full  price  effects  appears, 
then,  with  rough  approximation,  to  account  for 
the  general  price  rise  of  the  past  eighteen  years 
in  the  United  States. 

Again,  since  gold  is  the  basal  money  of  the 
whole  commercial  world,  this  increased  gold 
supply  satisfies  the  searcher  after  the  basic 
causes  of  generally  rising  prices  the  world  over. 
This  cause  and  this  alone,  of  all  the  alleged 
causes  analyzed  in  preceding  pages,  has  clear 


92  The  Cost  of  Living 

world-wide  effects  making  for  rising  prices 
everywhere.  The  ratios  of  changing  business 
volume  and  particularly  the  ratios  of  improv- 
ing and  extending  exchange  machinery  for  in- 
creasing the  rapidity  of  circulation  of  the  pri- 
mary gold  monies,  vary  with  different  coun- 
tries and  their  variation  doubtless  largely  ex- 
plains the  variations  in  the  general  price  rises 
in  the  different  nations. 

Once  more,  effects  of  this  increasing  gold 
supply  cause  harmonize  readily  with  the  fact 
that  prices  tended  steadily  downward  for  the 
double  decade  before  1897.  ^  table  of  the 
decades  of  gold  production  since  1850  will 
give  the  leading  facts  needed  to  show  this 
harmony : 

World's  Gold  Production  by  Decades  and  Annual 
Average  per  Decade 


Decade  Gold 

Annual  Gold  Prod. 

Decades 

Production 

per  Decade 

1851-60 

$1,332,981,000 

$133,298,100 

1861-70 

1,263,015,000 

126,301,500 

1871-80 

1,150,814,000 

115,081,400 

1881-90 

1,059,892,000 

105,989,200 

1891-1900 

2,101,240,900 

210,129,090 

1901-1910 

3,780,364,500 

378,036,450 

I9ii-i9i3(3y 

rs.)     1,382,678,200 

460,892,733 

This  table  shows  the  steady  decrease  in  the 
world's  average  annual  gold  output  from  i860 


Demand  Causes  93 

to  1890.  During  this  time  the  annual  output 
averaged  by  decades  fell  steadily  for  the  thirty 
years  from  over  $133,000,000  for  the  decade 
closing  i860,  to  less  than  $106,000,000  in  the 
decade  closing  1890.  During  the  sixties  the 
Civil  War  drew  hundreds  of  thousands  of  men 
from  productive  pursuits  and  thus  probably 
kept  the  volume  of  exchanges  from  increasing 
so  rapidly  as  it  otherwise  would  have  done, 
and  in  the  middle  seventies,  the  crisis  of  1873 
and  the  following  depression  years  again  held 
the  exchange  need  for  money  lower  than  it 
would  have  been.  But  reaction  came  in  the 
late  seventies  and  business  developed  more 
evenly  until  the  crash  of  1893. 

During  this  period  from  1875  to  1893,  while 
the  trade  volume  was  expanding  with  fair 
rapidity,  the  annual  output  of  the  world's  gold 
was  decreasing  steadily.  Moreover,  the  gen- 
eral exchange  machinery  proper  changed  little 
during  this  period.  Indeed,  the  nation  put 
in  the  whole  period  in  elaborate,  unsettled  de- 
bate about  silver  and  gold  standards,  with 
"  greenbackers  "  challenging  both  sides  in  the 
precious-metal  controversy.  The  nation  was 
still  largely  interested  in  the  border-life  new- 
land  problems.  It  took  things  more  "by  and 
large,"  laying  prophetic  lines  of  railway  and 


94  T^^  Cost  of  Living 

then  waiting  for  the  traffic  to  arrive,  and  deal- 
ing in  cattle  ranges  of  thousands  of  acres 
rather  than  in  truck  farms.  It  was  still  newly 
rich  and  did  not  feel  compelled  to  economize. 
The  changed  conditions,  during  the  past  twenty 
years,  have  made  the  national  mind  into  a  cul- 
ture bed  for  the  microbe  of  efficiency.  And 
efficiency  applied  to' the  exchange  system  has 
speeded  up  the  whole  process,  perfecting  it  all 
the  way  from  calculating  machines  up  to  the 
Federal  Reserve  banking  system. 

The  earlier  years,  then,  from  1875  on  to  1893, 
were  years  of  fairly  steady  increase  in  business 
volume,  with  a  steady  decrease  in  the  annual 
gold  product  and  with  few  important  improve- 
ments in  the  exchange  machinery.  And  this, 
by  our  price  reasoning,  means  a  period  of  de- 
mand for  basic  money  increasing  somewhat 
more  rapidly  than  the  supply  of  that  money  was 
increasing.  Gold,  therefore,  somewhat  appre- 
ciated; or,  the  other  side  of  the  shield,  prices 
tended  to  sag. 

The  increasing  gold  supply  coming  at  a  time 
when  efficiency  is  the  watchword  and  when, 
by  rapid  improvements  in  the  banking  and  gen- 
eral exchange  system,  every  new  gold  unit  is 
made  to  do  an  expanding  amount  of  business, 
seems  to  be  the  adequate  cause  of  generally 


Demand  Causes  95 

rising  prices  for  the  United  States  and  for  the 
world  at  large.  Consideration  of  this  same 
gold  supply  cause  in  relation  to  the  period  from 
1875  to  1897  harmonizes  the  conditions  as  to 
annually  decreasing  new  gold,  then,  with  the 
falling  prices  then,  just  as  clearly  as  the 
changed  gold  conditions  since  1 897,  explain  the 
generally  rising  prices  of  the  last  eighteen 
years. 

Prices  have  been  rising  in  densely  populated 
Belgium  and  in  sparsely  populated  Australia, 
in  high  protection  Germany  and  in  free  trade 
Britain,  in  many  goods  free  from  trust  con- 
trol more  rapidly  than  in  goods  of  leading 
trusts;  more  rapidly  in  the  products  of  unor- 
ganized farm  workers  than  in  many  lines  em- 
ploying highly  unionized  labor,  for  outdoor 
white  pine  and  corn  more  rapidly  than  for 
cold  storage  eggs,  and  so  on  through  the  list 
of  supply  and  demand  causes  we  have  ana- 
lyzed ;  but  rising  gold  supply,  through  its  mone- 
tary price  effects,  is  the  only  cause  which  op- 
erates everywhere,  which  affects  all  marketed 
things,  which  is  powerful  enough  to  force 
prices  up  the  hillside  steadily  for  a  score  of 
years  and  which,  accepted  as  a  leading  cause 
for  the  climb  of  prices  from  1897  to  1915,  can 
still  be  consistently  applied  as  explanation  of 


96  The  Cost  of  Living 

the  previous  twenty  years  of  falling  world 
prices.     • 

Other  causes,  doubtless,  operate  to  explain 
why  this  or  that  commodity  has  risen  far  more 
rapidly  or  far  less  rapidly  than  the  average 
rise  for  all  commodity,  but  this  one  cause  alone 
is  ample  to  explain  the  steady  upward  trend 
of  prices  generally. 

The  long  history  of  world  prices  since  the 
discovery  of  America  seems  to  corroborate 
this  conclusion.  In  the  i6th  century,  when 
Spanish  galleons  brought  their  cargoes  of  pre- 
cious metals  from  Peru,  Bolivia,  and  Mexico, 
the  European  supply  of  precious  metals  was 
greatly  increased.  Before  1540  the  mines  of 
the  world  were  producing  annually  about  $5,- 
000,000  worth  each  of  gold  and  of  silver.  The 
richest  of  the  new  world  mines  were  devel- 
oped after  1540  and  the  annual  silver  output 
multiplied  by  nearly  five,  the  gold  output  in- 
creasing slightly.  Prices  rose  first  in  Spain, 
where  the  new  silver  and  gold  first  came,  and 
then  in  other  parts  of  Europe,  as  trade  drew 
the  great  new  supply  of  the  money  metals  away 
from  Spain.  Is  it  not  confirmation  of  the  ar- 
gument above  to  find  that  European  prices 
rose  steadily,  more  than  doubling  between  1500 
and  1600? 


Demand  Causes  97 

The  inpouring  of  the  precious  metals  has 
continued  since  and  prices  have  risen  century 
by  century.  There  have  been  ups  and  downs. 
World  prices  rose  markedly  for  the  double 
decade  after  1849  ^^^  1850,  when  the  Cali- 
fornian  and  the  Australian  mines  richly  poured 
out  their  new  gold.  In  the  western  gold-stand- 
ard countries,  prices  gradually  and  steadily  fell 
from  the  middle  seventies  until  the  middle 
nineties,  a  period  during  which,  as  shown 
earlier  in  this  chapter,  the  annual  gold  output 
was  steadily  decreasing. 

Not  the  least  striking  item  in  this  historic 
confirmation  is  the  fact  that  prices  rose  in 
India,  China,  and  Japan,  the  great  silver  stand- 
ard countries  of  that  time,  from  the  middle 
seventies  to  the  middle  nineties.  During  this 
double  decade  both  the  silver  product  was  in- 
creasing greatly  and  many  occidental  nations 
were  changing  to  the  gold  standard  and  closing 
their  mints  to  silver.  Thus  the  silver  condi- 
tions were  the  very  reverse  of  the  gold  condi- 
tions. The  supply  of  silver  was  increasing 
and  the  demand  for  it  decreasing,  with  the 
result  that  silver  was  cheapening  during  the 
very  years  when  gold  was  appreciating  Those 
countries  which  measured  their  values  in  terms 
of  silver  registered  a  rise  of  prices  of  from 


98  The  Cost  of  Living 

ten  per  cent  in  China  to  about  thirty  per  cent 
in  India  during  the  very  double  decade  when 
prices  fell  steadily  in  the  gold  standard  occi- 
dental countries.  This  seems  to  be  a  double 
confirmation  of  the  proposition  that  changes 
in  the  supply  of  primary  money  media  are  the 
leading  explanations  of  changes  in  the  trend 
of  general  prices. 


CHAPTER  V 

EFFECTS 

I.  On  Business  Generally 

A   PERIOD  of  steadily  rising  prices  is  a 
period  of  stimulated  activity  for  the  busi- 
ness world  generally. 

A  captain  of  industry,  a  manufacturer, 
who  has  been  successful  and  is  planning  to 
build  an  extension  to  his  shop  or  factory,  will 
think  it  to  his  advantage  to  build  as  soon  as 
possible  if  he  believes  prices  are  to  continue 
to  rise  for  a  considerable  time  to  come.  To 
build  now  will  mean  that  his  building  material 
and  all  machinery  and  equipment  for  his  new 
building  will  cost  him  less  than  it  will  if  he 
waits  six  months  or  a  year.  Wages,  too,  may 
rise  if  he  waits,  and  the  labor  cost  of  his  new 
addition  thus  be  increased.  Furthermore,  if 
prices  are  to  continue  to  rise,  he  expects  the 
market  for  his  goods  will  be  "lively,"  and  it 
will  be  to  his  advantage  to  have  his  new  exten- 
sion in  use  at  the  earliest  possible  time.  He  is, 
therefore,  ready  to  take  any  risks.  He  mort- 
99 


icx)  The  Cost  of  Living 

gages  his  older  plant,  if  necessary,  to  get  funds 
to  finance  his  improvement.  He  thus  enters 
the  market  as  a  borrower,  increasing  the  de- 
mand for  loanable  funds,  and  as  an  employer 
of  labor  on  new  enterprises,  helping  take  up 
any  slack  there  may  be  in  the  demand  for  labor 
or  to  add  to  the  pressure  for  higher  wages  if 
substantially  all  labor  is  already  employed. 

As  this  manufacturer  reasons,  so  reason  his 
customers  in  the  retail  business.  Anticipating 
higher  prices,  they  lay  in  their  next  season's 
full  stock  early.  In  place  of  buying  samples 
only,  they  avail  themselves  of  credit,  if  nec- 
essary, to  get  the  advantage  of  whatever  rise 
may  occur.  This  employs  jobbers  busily  and 
gives  ample  notice  to  factories,  so  that  their 
products  may  be  sold  long  before  produced. 

Everyone  directing  affairs  in  the  business 
world,  from  humblest  contractor  to  most  ex- 
alted banker,  is  optimistic  and  confident.  Opti- 
mism and  confidence  set  credit  free.  The 
would-be  builder  can  secure  his  loan  and  the 
retailer  can  get  his  goods  on  time  or  secure  a 
loan  to  pay  for  them.  All  goods  are  on  the 
move,  all  men  are  employed  to  keep  them  mov- 
ing, all  drummers'  conclaves  and  all  directors' 
meetings  are  cheerful.    Prosperity  is. 


Eff.ects  1 01 


2.  On  Wages 

But  is  this  so-called  prosperity  shared  out 
equally  to  all? 

Wage  earners  share,  through  rising  wages, 
in  the  prosperity  of  the  rising-price  period,  but 
wages  generally  do  not  rise  so  rapidly  as  do 
prices.  This  is  what  one  would  expect,  rea- 
soning abstractly,  and  this  is  what  is  shown 
by  correlation  of  wage  and  price  facts.  The 
first  effect  of  a  steady  price-rise  period  upon 
wage  earners  is  to  increase  the  call  for  wage 
workers.  Employable  unemployed  find  work 
again,  and  those  who  have  been  employed  part 
time  only  get  full  time  places.  The  rise  in 
prices  must  continue  some  time  to  beget  the 
venturesome  spirit  outlined  above,  and  must 
continue  longer  before  it  takes  up  the  whole 
unemployment  and  part  time  slack.  It  must 
continue  still  further  before  employers  and  la- 
bor leaders  both  see  clearly  that  labor  is  scarce, 
that  the  tables  have  so  far  turned  as  some- 
times to  make  several  bosses  compete  for  the 
services  of  the  same  man  or  group  of  men. 
Prices  must  have  risen  appreciably  before  la- 
borers begin  to  grumble  at  the  higher  price 
levies  on  them  as  consumers. 


I02  The  Cost  of  Living 

The  time  is  now  ripe  for  wages  to  begin  to 
advance.  Employers  know  the  scarcity  of 
workers  and  are  already  reaping  pleasing  prof- 
its. They  are  eager  to  keep  their  plants  run- 
ning to  full  capacity,  that  they  may  take  utmost 
advantage  of  this  profit-making  time.  They 
are,  therefore,  disposed  to  yield  quickly  to  any 
pressure  for  wage  rise  or  even  to  anticipate 
such  pressure.  The  workmen  also  know  that 
labor  is  scarce  and  know  that  since  the  things 
they  must  buy  are  all  mounting  in  price,  em- 
ployers must  be  making  more  than  before  and 
must,  therefore,  be  both  able  and,  rather  than 
have  work  stop,  willing  to  grant  wage  rises.  So 
it  comes  about  that,  in  a  few  places,  employers 
voluntarily  raise  wages,  and  in  many  more 
wages  are  raised  at  request,  or  at  threat  of  the 
workers.  Any  employers  who  still  resist  are 
likely  to  suffer  from  an  unhesitating  strike,  for 
the  condition  described  above  is  perfect  strike 
weather. 

When  unusual  profits  are  to  be  lost  if  work 
stops,  when  promising  orders  from  insistent 
customers  may  be  lost  altogether,  the  employer 
thinks  several  times  before  precipitating  a 
strike.  On  the  other  hand,  the  employees 
know  the  employer's  hesitancy.  They  are  also 
Strengthened  greatly  by  the  facts:     (i)  That 


Effects  103 

labor  generally  is  fully  employed  and  any 
strikers  can  therefore  be  assured  the  fullest 
measure  of  support  in  the  form  of  strike  pay 
and  the  greatest  freedom  from  "strike-break- 
ers." (2)  That  since  wages  have  already  been 
raised  widely  and  since  the  advancing  cost  of 
living  is  in  clear  evidence  to  everybody,  the 
burden  of  proof  is  rather  distinctly  put  upon 
the  employer  to  show  excellent  reason  for  re- 
fusal to  raise  wages.  (3)  That  public  sym- 
pathy, because  of  i  and  2,  is  likely  to  be 
strongly  on  the  side  of  the  workmen. 

But  all  this  takes  time  and  prices  are  steadily 
rising.  They  have  risen  probably  eight  or  ten 
per  cent  before  any  especial  pressure  is  noticed 
by  consumers.  They  must  have  risen,  per- 
haps, ten  per  cent,  and  all  things  must  point 
to  their  likely  continued  advance  before  em- 
ployers will  be  at  all  assured  of  profits  or  eager 
to  avoid  a  strike.  By  the  time  a  wage  ad- 
vance of  five  per  cent  is  secured,  prices  will 
be  found  probably  ten  to  fifteen  per  cent 
higher.  By  the  time  wages  are  slowly  crowded 
to  a  ten  to  fifteen  per  cent  rise,  prices  are 
likely  to  be  twenty  to  thirty  per  cent  higher, 
and  so  on.  Wages  rise,  but  they  quite  gen- 
erally lag  in  their  rise  considerably  behind  the 
rises  in  prices,  and  never  rise  generally  so  high 


I04  The  Cost  of  Living 

as  do  the  retail  prices  generally  of  the  goods 
workmen  must  buy. 

Illustrative  facts  may  be  cited. 

The  last  general  wage  study  made  by  the 
Federal  Bureau  was  made  in  1908,  covering 
wages  for  over  350,000  workmen  in  wide 
range  of  industries  and  intended  to  be  rep- 
resentative of  the  wage  situation  generally  in 
1907.  This  report  summarized  that  the  full 
time  weekly  wages  of  the  studied  workmen  in 
1907  were  a  little  over  twenty-two  per  cent 
higher  than  were  corresponding  wages  on  the 
average  from  1890  to  1899.  Compare  these 
wage  advances  with  advance  in  the  retail  prices 
of  fifteen  articles  of  food  which  have  been 
chosen  so  that  they  represent  approximately 
two-thirds  of  the  expenditure  for  food  by  an 
average  workingman's  family.  These  fifteen 
food  articles  are  listed  in  the  Federal  report 
on  retail  prices  as  averaging  twenty-eight  per 
cent  higher  in  1907  than  in  the  nineties.  Omit- 
ting sugar,  which  was  the  one  item  cheaper 
than  in  the  nineties,  the  remaining  fourteen 
items  average  a  little  more  than  thirty  per  cent 
higher. 

No  general  Federal  wage  report  has  been 
published  since  this  report  covering  1907,  but 
several  reports   giving  special   wage  returns 


Effects  105 

from  1907  to  191 3  have  been  published.  The 
most  complete  of  these  wage  reports  gives  for 
the  United  States  and  for  May  15,  191 3,  the 
union  scale  of  wages  in  the  same  forty  cities 
from  which  the  retail  prices  of  the  fifteen  food 
articles  are  gathered.  This  makes  it  more  ac- 
ceptable to  coordinate  these  wage  rates  and  the 
retail  prices.  These  forty  cities  include  ap- 
proximately one-third  of  all  gainful  workers  in 
the  United  States,  excluding  those  in  agricul- 
tural pursuits.  The  union  scales,  as  given, 
state  definite  wages  agreed  to  by  employers 
and  under  which  the  men  are  actually  working. 
For  the  six  groups  of  unions  giving  data,  the 
following  table  gives  the  average  per  cent  of 
rise  in  union  wages  since  1907: 

Per  Cent  of  Increase  Averaged  by  Union  Groups 
IN  Rates  of  Full-time  Weekly  Wage 
From  1907  to  May  15,  1913 

Average  Per  Cent 

Trades  of  Increase 

Bakery    19.4 

Building    11.4 

Granite  and  Stone 5.3 

Metal    13.1 

Printing,  Book  and  Job 11.8 

Printing,  Newspaper 10.8 

Average  of  these  Averages 11.97 


io6  The  Cost  of  Living 

The  fifteen  selected  food  articles,  mentioned 
above,  listed  in  May,  1913,  at  161. 7  as  com- 
pared with  128  in  1907.  This  shows  a  rise  in 
the  average  retail  price  of  these  food  articles 
of  26.3  per  cent  during  the  same  time  in  which 
union  wages  on  the  average  rose  only  11.97 
per  cent.  The  figures  are  not  yet  printed  show- 
ing the  wage  scales  of  these  unions  for  the 
later  months  of  191 3,  but  it  does  not  seem 
likely  that  their  average  wages  could  have  been 
very  greatly  increased  from  May  to  Decem- 
ber, 19 13,  when  they  rose  less  than  twelve 
per  cent  in  the  preceding  six  years. 

The  figure  for  the  retail  price  of  the  fifteen 
food  articles  averaged  for  the  last  four  months 
of  the  year  191 3  is  174.6.  This  figure  shows 
the  swift  rise  in  the  food  cost  of  living  during 
the  year  191 3,  the  last  four  months  of  the 
year  averaging,  for  these  fifteen  articles  of 
food,  eight  per  cent  higher  prices  than  in  May 
of  the  same  year.  This  figure  174.6  shows  an 
average  food  cost  rise  of  36.4  per  cent  for  the 
last  four  months  of  191 3  above  the  average 
for  the  year  1907,  to  be  compared  with  a  union 
wage  rise  for  the  same  period  little,,  if  any, 
more  than  twelve  per  cent. 

Other  Federal  reports  giving  the  wages  in 
special  industries  for  19 13  confirm  the  facts' 


Effects  107 

stated  above,  as  the  following  table  computed 
from  them  will  show: 


Relative    Full-time    Weekly    Wages    for    Certain 

Industries  in  1913  as  Compared  With  Their 

Averaged  Wages  for  1890-1899  as  100 

Relative  Rates 
Industry  Weekly  Wage 

Boot  and  Shoe  Manufacturing 133.5 

Hosiery  and  Underwear  Manufacturiiig.        141. i 

Cotton   Manufacturing 153-3 

Woolen  and  Worsted 137-8 

Lumber   Manufacturing i3i-4 

Millwork    Industry 129.9 

Furniture    Manufacturing 129.2 


The  above  figures  must  be  compared  with 
the  figure  167  per  cent  for  the  price  average 
of  the  fifteen  food  articles  for  the  year  1913, 
or  perhaps  with  the  figure  for  these  same 
articles  for  the  last  four  months  of  that 
year,  174.6.  Wage  increase  is  thus  shown  to 
have  lagged  far  behind  food  price  increase. 

Dr.  1.  M.  Rubinow,  in  a  recent  study  pub- 
lished in  the  American  Economic  Review, 
gives  a  table  to  indicate  the  purchasing  power 
of  money  wages  in  the  United  States  as  meas- 
ured by  the  retail  prices  of  food.  Such  a  table 
combines  the  wage  and  price  data  given  above, 


io8  The  Cost  of  Living 

and  puts  the  same  conclusions  in  a  different 
form: 

Purchasing  Power  of  Wages  in  the  United  States 

Measured  by  Retail  Prices 

OF  Food — 1890  to  1912 

Averages   for   1890  to   1899=100 


Purchasing  Power 

Purchasing  Power 

of  Weekly 

of  Weekly 

Year 

Earnings 

Year 

Earnings 

1896 

104.7 

1905 

98.6 

1897 

102.5 

1906 

98.0 

1898 

100. 1 

1907 

977 

1899 

99-8 

1908 

93. 

1900 

100.2 

1909 

89.4 

1901 

96.8 

1910 

87^ 

1902 

94-3 

191 1 

88.9 

1903 

97-3 

1912 

85.3 

1904 

96. 

The  conclusion  from  this  table  is  that,  in 
19 1 2,  American  workmen  were  able  to  buy 
only  85.3  per  cent  as  much  of  food,  at  retail, 
with  their  weekly  wages,  as  they  could  have 
bought  during  the  nineties. 

The  British  figures  give  results  similar  to 
those  shown  by  the  American  figures.  From 
the  Sixteenth  Abstract  of  Labor  Statistics  for 
the  United  Kingdom,  the  following  table  is 
compiled : 


Effects  109 


Course  of 

British  Wages  and  Retail  Prices 

Wages 

and  Prices 

of  Year  1900= 
Wages 

=100 

Including 

Excluding 

Retail  Food 

Year 

Agriculture 

Agriculture 

Prices 

1896 

89.92 

89.24 

91.7 

1899 

95-37 

95.06 

95-4 

1906 

98.42 

9760 

102. 

1910 

100.32 

99.70 

109.4 

1912 

102.98 

102.46 

1 14-5 

These  figures  show,  in  brief,  that,  while 
British  wages  in  19 12  were  less  than  three  per 
cent  higher  than  they  were  in  1900,  the  retail 
prices  of  the  food  these  workmen  had  to  buy 
had  risen  over  fourteen  per  cent  during  the 
same  twelve  years.  This  registers  a  ten  per 
cent  loss  in  food  purchasing  power  to  the  Brit- 
ish workman  in  the  twelve  years. 

Such  facts  as  stated  above  indicate  that 
while  workmen  may  advantage  in  a  rising  price 
era  by  having  more  regular  employment,  their 
weekly  wages  do  not  rise  so  rapidly  as  do  the 
prices  of  their  living  necessities. 

5.  On  Salaries  and  Bond  Incomes 

Receivers  of  salaries  are  apt  to  suffer  still 
more  than  wage  earners.  Salary  range  is 
more  fixed.  The  salary  lists  for  public  school 
teachers    and    for    public    employees    gener- 


no  The  Cost  of  Living 

ally,  will  not  commonly  be  found  appreciably 
changed  in  the  past  fifteen  years,  although, 
as  indicated  above,  wages  have  advanced  and 
have  advanced  far  in  some  lines  of  manu- 
facture. The  more  nearly  an  income  ap- 
proaches fixedness,  the  heavier  its  receiver's 
loss  in  a  period  of  rising  prices. 

This  may  readily  be  shown  by  using  interest 
incomes  from  first  grade  long  time  bonds  as 
illustration  of  the  fixed  income.  Suppose  that 
an  investor  pays  par  value  for  a  $i,ooo  bond 
bearing  four  per  cent  interest  annually.  Sup- 
pose that  during  the  following  year  prices  rise 
two  and  one-half  per  cent,  about  the  actual 
corresponding  annual  average  rise  during  the 
last  eighteen  years.  This  rise  of  two  and  one- 
half  per  cent  in  prices  means  that  the  investor 
at  the  end  of  the  year  must  have  $1,025  to  be 
able  to  buy  the  same  amount  of  general  com- 
modity which  he  could  have  bought  with  his 
$1,000  when  he  invested  in  the  bond.  Assum- 
ing that  at  the  end  of  the  year  he  can  sell  his 
bond  for  $1,000,  he  will  then  have,  in  inter- 
est for  the  year  and  in  principal,  $1,040.  But 
he  must  have  $1,025  to  buy  the  same  things 
he  could  have  bought  for  $1,000  at  the  year's 
beginning.  Therefore,  his  $1,040,  while  forty 
dollars  more  in  money,  is  really  only  fifteen 


Effects  III 

dollars  more  in  purchasing  power  than  he  had 
at  the  beginning.  And  this  fifteen  dollars  will 
not  purchase  so  much  as  fifteen  dollars  at  the 
first  of  the  year.  Furthermore,  he  probably 
could  not  get  the  full  $i,ooo  for  his  bond, 
just  because  of  this  small  net  return  in  pur- 
chasing power.  But  disregarding  these  minor 
losses,  the  major  fact  is  clear,  viz.,  that  he  has 
received,  net,  only  fifteen  dollars  interest  on 
$i,ooo,  or  one  and  one-half  per  cent  instead 
of  four  per  cent. 

This  example  makes  clear  the  principle  that 
a  general  rise  in  prices  lowers  the  real  income 
of  those  whose  dollar  and  cent  income  is  fixed. 
This  principle  may  be  shown  directly  by  con- 
sideration of  the  repayment  of  the  principal 
sum  when  the  bond  matures.  At  maturity  the 
bond  is  redeemed  by  the  payment  of  $1,000. 
If  such  a  bond  had  been  purchased  for  par  in 
1896  and  redeemed  in  January  i,  19 14,  the 
investor  would  have  been  able  to  buy,  with 
his  $1,000,  in  general  wholesale  commodity  in 
the  United  States,  what  $740  would  have 
bought  in  1896,  and  in  general  retail  food 
supplies,  what  $575,  only,  would  have  bought 
in  1896.  That  is,  after  letting  others  have 
the  use  of  his  $1,000  for  eighteen  years,  and 
in  the  meantime  receiving  year  by  year  forty 


112  The  Cost  of  Living 

dollars  for  its  use,  he  finds  at  the  end  of  this 
long  period  that,  in  purchasing  power  terms, 
his  capital  has  shrunk  to  less  than  three-quar- 
ters what  it  was — or,  measuring  in  retail  food 
prices,  to  only  fifty-seven  and  one-half  per  cent 
what  it  was  when  he  loaned  it. 

Bond  price  returns  evidence  this  serious  loss 
to  holders  of  long  time  bonds.  The  bonds 
of  even  great  nations  such  as  the  United 
States,  Great  Britain  and  France  have  been 
steadily  declining  in  price  during  the  long 
rising  commodity  price  period.  French  Ren-, 
tes,  for  example,  which  sold  at  average  annual 
net  price  of  102.95  in  1896,  were  quoted  at 
ninety-two  and  seven-tenths  in  April,  191 2,  and 
at  eighty-seven  and  two-tenths  in  February, 
1914,  British  Consols  dropped  steadily  from 
ninety- four  and  three-eighths  in  1902  and  after 
the  South  African  War  was  ended,  to  seventy- 
two  and  five-eighths  in  19 13.  The  Wall  Sreet 
Journal  publishes  from  time  to  time  a  chart 
giving  the  course  of  average  quotations  for 
twenty-five  representative  railway  bonds.  For 
1906  the  quotations  for  these  twenty-five  bonds 
averaged  97.915;  for  1912,  90.945. 

Staple  municipal  and  industrial  bonds  show 
the  same  general  tendency  as  these  railway 
bonds.    The  same  thing  is  shown  from  a  dif- 


Effects  113 

ferent  angle  in  Babson's  table  of  the  average 
yield  of  five  selected  bonds.  These  bonds  in 
the  years  from  1896  to  1900  were  yielding  an 
average  of  3.36  per  cent,  while  in  the  year 
191 3  they  yielded  on  the  average  4.22.  Since 
their  actual  rates  for  interest  were  fixed,  this 
means  that  in  19 13  they  could  be  bought  for 
less  than  in  1896- 1900,  less  by  an  amount  suffi- 
cient to  raise  the  interest  return  to  the  buyer 
from  3.36  per  cent  to  4.22  per  cent. 

A  spectacular  effect  of  this  falling  price  pe- 
riod for  bonds  is  the  heavy  loss  to  such  insti- 
tutions as  savings  bank  and  insurance  com- 
panies, if  the  current  market  value  of  their 
large  bond  holdings  be  compared  with  the 
prices  they  paid  for  these  securities  ten  to 
twenty-five  years  ago.  This  loss,  however,  in 
the  case  of  such  institutions  may  perhaps  be 
disregarded  as  a  "paper"  loss  only,  since  they 
will  continue  to  hold  the  bonds  and  at  ma- 
turity will  get  par  for  them.  For  example, 
thirty  year  three  and  one-half  per  cent  bonds 
issued  twelve  or  fifteen  years  ago  may  have 
cost  the  savings  bank  par.  If  the  bank  were 
forced  to  market  the  bond  in  these  years,  quite 
apart  from  the  financial  disarrangements  due 
to  the  war,  it  would  probably  lose  fifteen  to 
twenty  per  cent  of  its  original  investment. 


114  The  Cost  of  Living 

Both  the  reasoning  and  the  facts  establish 
the  proposition  that  in  the  past  years  of  rising 
commodity  prices  bonds  have  tended  down- 
ward steadily  in  price. 

4.  On  Debtors  and  Creditors 

The  reasoning  above  with  reference  to  bonds 
applies  generally  to  the  relationship  of  debtors 
and  creditors  in  a  period  of  rising  prices.  The 
borrower  gets  a  fixed  sum  and  pays  a  stipulated 
interest.  As  prices  rise,  the  interest  has  low- 
ered purchasing  power,  and  the  principal  when 
paid  has  declined  in  purchasing  power  just 
as  in  the  case  of  bonds.  The  creditors  of  long 
standing  obligations  are  suffering,  then,  in  this 
period  of  rising  prices  just  as  the  debtors  suf- 
fered from  falling  prices  during  the  period 
from  1876  to  1896. 

5.  On  Owning  Producers 

This  rising  price  period  has  been  one  of 
large  gain  to  farmers,  gardeners,  fishermen, 
and  timbermen  who  are  owning  producers.  In 
the  Federal  wholesale  price  list,  farm  products 
as  a  whole  are  shown  to  have  sold  for  65.8 
per  cent  more,  on  the  average,  during  the  year 


Effects  115 

19 1 3  than  during  the  nineties.  The  price-listed 
fish  items,  averaged  thirty-six  per  cent  above 
their  nineties'  prices,  despite  the  fact  that  one 
of  the  four  items,  mackerel,  was  selling  twenty 
per  cent  cheaper  than  in  the  nineties.  The 
nine  lumber  items,  giving  relative  prices,  gave 
an  average  price  in  1913  eighty-three  per  cent 
higher  than  their  average  for  the  nineties.  In 
the  case  of  fishermen,  the  prodigal  catches  of 
the  past  generation  are  beginning  to  lessen  ap- 
preciably the  stock  of  food  fish  and  the  smaller 
individual  catches  for  the  season  may  offset 
the  risen  price  obtained. 

Neither  does  timber  give  a  generally 
shared  advantage  through  its  risen  price.  Its 
price  has  risen,  in  appreciable  part,  because 
small  lot  marketable  lumber,  near  the  greater 
demand  centers,  has  practically  disappeared. 
But  the  large  rise  in  farm  products  registers 
a  widely  diffused  gain  in  the  United  States. 
The  last  census  listed  6,361,502  farm  operators 
in  the  United  States  and  listed  farm  property 
as  worth  $40,991,449,090.  This  valuation  for 
farm  property  is  just  a  shade  more  than  double 
its  valuation  in  1900,  only  ten  years  before. 
This  enormous  valuation  increase  is  due,  in 
large  part,  to  the  capitalized  increase  of  re- 
turn from  farm  land,  made  possible  through 


ii6  The  Cost  of  Living 

the  increased  prices  of  products  from  that 
land. 

Fifteen  years  ago  a  mortgage  blanket  lay 
over  the  whole  Mississippi  Valley.  A  genera- 
tion of  homesteaders  seemed  so  hopelessly  in 
debt  that  the  electorate  of  the  nation  very 
nearly  revolutionized  the  nation's  monetary 
system,  moved,  in  no  small  part,  to  this  deci- 
sion by  eloquent  appeals  in  behalf  of  farmer 
debtors.  Today  those  mortgages  hang  on  the 
walls  of  new  farm  houses,  framed  as  memen- 
toes of  pioneering  hardships.  The  banks  in 
the  great  farming  districts  have  enormous  de- 
posits to  the  credit  of  the  farmers.  New 
houses,  new  barns,  better  stock,  latest  labor- 
saving  machines  evidence  prosperity.  An  in- 
creasing proportion  of  the  farm  work  is  being 
done  by  power  machinery.  Some  of  the  vil- 
lages of  wheat  farmers  in  the  Upper  Missis- 
sippi Valley  boast  a  larger  number  of  automo- 
biles owned  in  proportion  to  their  populations 
than  any  of  the  large  cities. 

The  past  eighteen  years  of  rising  prices  have 
been  a  happy  period  for  the  owning  producers 
of  the  United  States.  And  when  it  is  remem- 
bered that  they,  with  their  employees  and  de- 
pendents, constitute  nearly  one  half  of  the 
nation's  population,  their  growing  prosperity 


Effects  117 

will  be  seen  to  be  a  very  great  gain  for  the 
nation. 

6.  On  Interest 

During  a  period  of  steadily  rising  prices, 
interest  rates  rise.  The  cause  for  this  has 
already  been  indicated  in  dealing  with  the  ac- 
celeration of  general  business  enterprise  due  to 
a  rising  price  period.  The  lowering  prices 
of  long  term  bonds,  also  cited  above,  is  but 
one  of  the  effects  of  the  rising  interest  rate. 
Interest  rates  do  not  rise  so  rapidly  as  do 
prices.  Because  neither  wages  nor  interest 
rates  rise  so  rapidly  as  prices,  the  rising- 
price  period  is  a  period  of  larger  profit  oppor- 
tunity to  business  enterprisers.  This  leads 
them  to  venture  further  in  business  expansion, 
to  borrow  more  freely,  and  thus  to  increase  the 
demand  for  loanable  capital.  This  increased 
demand  slowly  registers  itself  in  a  higher  in- 
terest rate. 

So  long  as  the  price  rise  is  hurrying  ahead 
of  the  interest  and  the  wage  rise,  there  is 
lure  for  the  enterprisers  to  borrow  more  and 
more,  and,  therefore,  the  interest  rate  tends 
steadily  to  rise  during  a  period  of  continually 
rising  prices.  During  this  recent  rising  price 
period,  interest  rates  have  been  driven  upward 


Ii8  The  Cost  of  Living 

in  the  United  States.  Types  of  securities  such 
as  municipal  and  first  grade  railway  bonds, 
which  would  net  a  purchaser  only  three  per 
cent  to  three  and  three- fourths  per  cent  on 
his  investment,  twelve  to  fifteen  years  ago, 
can  today  be  bought  at  prices  realizing  for 
the  investor  from  four  per  cent  to  five  per 
cent.  On  the  other  hand,  borrowers  who  with 
given  security  could  get  their  long-time  loans 
readily  at  5  per  cent  a  dozen  years  ago  may 
have  difficulty  in  getting  similar  loans  for  six 
per  cent  now.  And  it  should  be  noted  that 
a  rise  from  five  per  cent  to  six  per  cent,  in 
prevailing  rate  of  interest,  is  a  rise  of  twenty 
per  cent  in  the  amount  of  interest  to  be  paid 
for  a  given  loan. 

Roughly,  what  has  happened  during  the  past 
eighteen  years  is  that  general  wholesale  prices 
in  the  United  States  have  risen  some  thirty- 
five  per  cent,  general  retail  prices  probably  over 
fifty  per  cent  on  the  average,  while  the  pre- 
vailing interest  rates  have  risen  twenty  per  cent 
to  twenty-five  per  cent. 

7.  On  Crises 

A  financial  or  an  industrial  crisis,  or  the  bat- 
tering combination  of  both  financial  and  in- 
dustrial crises,  may  occur  during  a  period  when 


Effects  1 19 

the  fundamental  factors  are  making  for  a 
steady  general  rise  in  prices.  In  such  a  case, 
the  crisis  is  apt  to  be  less  severe  and  the  de- 
pression period  following  the  acute  crisis  is 
sure  to  be  less  prolonged  than  if  fundamental 
factors  were  not  forcing  prices  upward.  What- 
ever may  have  caused  the  crisis,  it  is  clear  that 
when  that  crisis  drives  prices  downward,  al- 
though important  influences  are  impelling  them 
upward,  it  is  working  directly  against  the  fun- 
damental tendency  and,  therefore,  cannot  be 
so  extreme  in  its  effects. 

If  the  analysis  of  rising  price  causes  made 
in  foregoing  chapters  is  correct,  then  the  great 
increase  in  the  world's  gold  supply  and  the 
notable  perfecting  of  the  exchange  machinery 
generally,  are  the  fundamental  causes  which 
are  driving  prices  upward.  These  causes  have 
been  steadily  at  work  since  the  late  nineties. 
The  coming  of  a  business  crisis  would  not  ap- 
preciably interfere  with  either  of  these  causes. 
For  example,  during  the  year  1908,  a  depres- 
sion year  for  general  business,  the  world  in- 
creased its  gold  production  above  that  of  1907 
by  nearly  $30,000,000,  one  of  the  largest  an- 
nual increases  in  the  past  twenty  years. 

The  main  explanation  of  the  quick  recovery 
from  the  serious  1907  crisis  is  that  the  basic 


I20  The  Cost  of  Living 

factors  were  pressing  urgently  upward  on 
prices.  Every  month  which  the  business  de- 
pression continued  only  served  to  increase  the 
upward  pressure  of  these  factors.  The  ulti- 
mate result  was  that,  although  the  crisis  period 
was  the  end  of  1907  and  the  beginning  of 
1908,  prices  had  generally  rebounded  by  the 
end  of  1909  to  as  high  a  point  as  before  the 
crisis  and  averaged,  for  the  year  19 10,  over 
two  points  higher  than  for  the  year  1907. 

Contrast  this  quick  recovery  with  either  the 
crisis  of  1873  or  that  of  1893.  Both  of  these 
came  in  periods  when  the  tendency  of  prices 
generally  was  downward.  In  both  of  these 
cases  the  sharp  crisis  was  followed  by  a  se- 
rious depression  lasting  for  three  to  four 
years.  General  prices  in  the  nineties,  for  ex- 
ample, were  not  lowest  in  the  crisis  year,  1893, 
nor  yet  in  the  year  immediately  following,  but 
they  kept  steadily  sagging  lower  and  lower 
until  they  touched  the  lowest  level  for  annual 
average  price  in  1897,  the  fifth  year  of  the 
panic  and  depression  series. 

8.  On  General  Social  Reform 

Not  the  least  important  of  the  effects  of  a 
period  of  rising  prices  is  its  stimulus  to  social 
reform.     The  very  downward  pressure  upon 


Effects  121 

the  standards  of  living  of  the  great  body  of 
wage  earners,  due  to  the  fact  that  wage  rises 
more  tardily  than  does  price,  compels  a  new 
social  invoice.  The  new  invoice  both  restates 
the  ages-old  inequalities  of  wealth  distribution 
and  of  burden  bearing  among  men,  and 
forcibly  presents  the  new  tendancy  to  the  in- 
crease of  those  inequalities  through  laggard 
wages  and  hurrying  prices.  In  a  prolonged 
period  of  rising  prices  the  general  industrial 
democracy  is  sure  to  be  more  active,  more  ag- 
gressive, and  more  convincing  in  its  ^campaign 
for  the  equalization  of  economic  opportunity. 
The  increasing  difficulty  of  making  family 
incomes  adequately  supply  family  needs  stimu- 
lates all  manner  of  detail  social  reform  move- 
ments. Older  philanthropic  societies  emphasize 
the  direr  needs  of  their  proteges  and  older  po- 
litical reform  leagues  renew  their  exhortations 
to  public  economy.  New  societies  spring  into 
being,  one  for  the  lowering  of  rents,  another 
for  instituting  or  for  extending  public  free 
markets,  a  third  which  leagues  housewives  for 
common  purchase  of  their  daily  supplies.  The 
great  political  parties  all  search  for  vote-induc- 
ing proposals  to  decrease  the  cost  of  living. 
Manufacturers  and  retailers,  stung  by  frequent 
charges  of  extortion  in  their  prices,  invent  cost 


122  The  Cost  of  Living 

cheapening  processes  and  methods  of  business 
organization. 

So  men  are  roused  to  better  the  modes  of 
the  production  and  the  distribution  of  wealth, 
more  rational  consumption  of  wealth  is  stimu- 
lated, the  philosophy  of  man's  relations  to 
wealth  is  deepened  and  broadened,  and  the 
whole  social  machinery  is  steadily  modified 
that  it  may  function  more  perfectly  in  behalf 
of  deep  democracy  —  all  through  the  urge  of 
a  rising-price  regime. 

In  summary  of  its  leading  effects,  then,  a 
prolonged  rising -price  period  energizes  the 
business  world  generally,  operates  to  the  ad- 
vantage of  debtors  and  of  owning  producers 
and  to  the  disadvantage  of  creditors  generally, 
of  wage  earners,  of  salaried  persons,  and  of 
receivers  of  fixed  incomes;  causes  interest 
rates  to  rise,  lessens  the  severity  of  crises  and 
the  duration  of  depressions  and  stimulates 
social  reconstruction,  both  in  fact  and  in 
philosophy. 


CHAPTER  VI 


REMEDIES 


T  T  seems  commonly  assumed  that  rising 
■■•  prices  are  regrettable  altogether  and  that 
something  should  be  done  speedily  to  stop  the 
rise.  So  come  the  wise  men  and  the  doctors, 
each  with  his  prescription  for  the  ailment. 
This  one  would  destroy  the  tariff  and  that  one 
the  trust.  Another  would  solve  the  whole 
problem  by  making  better  public  roads  and 
still  another  by  converting  the  world  to  vege- 
tarianism. There  are  almost  as  many  reme- 
dies proposed  as  there  are  doctors.  And  all 
the  time  rising  prices  are  calmly  assumed  to 
be  a  symptom  of  social  disease. 

I.  Rising  Prices  May  Be  Beneficial 

Our  brief  study  of  the  effects  of  a  rising 
price  period  makes  clear  that  rising  prices  are 
not  altogether  evil.  To  millions  in  the  nation 
the  rising  prices  have  been  a  great  blessing. 
Even  the  great  wage-earning  classes  whose 
losses,  through  their  decreased  real  incomes, 
123 


124  T^he  Cost  of  Living 

are  appreciable,  have  some  offsets.  Perchance 
they  have  a  far  greater  offset  than  our  hur- 
ried survey  suggests,  in  the  speeding  up  of 
general  social  reconstruction,  a  process  ever 
in  favor  of  the  common  man.  The  receivers 
of  fixed  incomes,  notably  the  holders  of  long- 
time bonds,  are  the  absolute  losers,  with  no 
recourse.  The  very  social  reconstruction 
which  may  advantage  the  wage  earner  not 
infrequently  levies  some  additional  tax  burden 
upon  the  owners  of  such  property.  But  the 
people  who  are  mainly  dependent  upon  unvary- 
ing dollar  and  cent  incomes  from  bonds,  an- 
nuities, allowances,  pensions,  and  the  like,  con- 
stitute so  small  a  fraction  of  the  whole  na- 
tion that  their  losses,  from  a  social  viewpoint, 
are  far  outweighed  by  the  considerable  gains 
to  the  millions  of  independent  farmers. 

In  the  very  beginning  of  a  discussion  of 
so-called  "  remedies,"  then,  emphasis  should  he 
put  upon  the  fact  that  large  social  gains  have 
been  made  because  prices  have  risen. 

It  remains  decidedly  worth  while,  neverthe- 
less, to  seek: 

(o) — An  estimate  of  the  future  duration 
and  extent  of  the  rise,  if  no  artificial  check  be 
introduced. 


Remedies  125 

(b)  — Means  to  secure  highest  possible  off- 
sets, during  the  continuance  of  rising  prices, 

,  for  such  losses  as  are  due  to  rising  prices. 

(c)  —  Means  to  stop  the  rise  of  prices  delib- 
erately, if  the  losses,  due  to  the  rise,  so  greatly 
exceed  the  gains  that  resort  to  artificial  control 
over  general  price  is  deemed  to  be  necessary. 

2.  Will  Prices  Continue  to  Rise? 

The  basic  explanation  of  generally  rising 
price  has  been  shown  to  be  that  the  rapid 
increase  of  gold  supply,  combined  with  the 
rapid  improvement  of  the  general  machinery 
of  exchange,  has  increased  the  money  service 
of  the  world  more  rapidly  than  the  rising  vol- 
ume of  the  world's  exchanges  has  increased 
the  world  demand  for  money  service.  There- 
fore, the  duration  of  the  rising  price  period 
and  the  greatest  height  of  rise  are  dependent 
upon  the  future  relationship  between  the  vol- 
ume of  business  and  the  gold  exchange  condi- 
tions. So  long  as  the  gold  exchange  machinery 
increases  in  effectiveness  more  rapidly  than 
the  volume  of  business  exchanges  increases, 
prices  will  continue  to  rise. 

There  are  natural  checks  upon  the  increased 
effectiveness  of  the  gold  exchange  machinery. 


126  The  Cost  of  Living 

This  increased  effectiveness  has  been  shown 
to  come  in  part  from  the  actual  annual  in- 
creases of  the  gold  supply.  Among  the  lead- 
ing natural  checks  upon  this  annual  gold  in- 
crease are:  (a)  Exhausting  of  known  gold 
deposits  without  discovery  of  new  deposits; 
(b)  Slow  improvement  in  processes  of  mining 
and  of  extracting  gold;  (c)  Steady  cheapen- 
ing of  gold,  making  it  less  and  less  profitable 
to  work  given  veins  and  mines.  We  shall 
consider  these  in  their  order. 

(a) — For  some  years  the  gold  output  of 
the  world  outside  of  the  Transvaal  mines  has 
been  nearly  stationary,  while  the  output  of  the 
Transvaal  has  been  increasing.  The  strike  of 
the  white  miners  on  the  Rand,  in  the  summer 
of  191 3,  caused  a  decreased  Transvaal  produc- 
tion and  the  world  production  for  that  year 
fell  behind  the  output  for  191 2.  In  this  con- 
nection it  is  suggestive  to  note  that  a  Trans- 
vaal correspondent  for  the  London  Times  re- 
ported in  19 1 2  that  the  yield  of  gold,  per  ton 
milled  on  the  Rand,  fell  steadily  from  35.8 
shillings  in  1905  to  27.9  shillings  in  the  first 
nine  months  of  191 1.  These  mines  would 
doubtless  be  worked  steadily  at  even  consid- 
erably lower  figures  of  ton  yield,  but  the  de- 
cline is  significant.     When  the  ores  of  this 


Remedies  127 

richest  of  the  world's  known  gold  producing 
areas,  this  area  which  in  recent  years  has  been 
furnishing  from  thirty-five  per  cent  to  forty 
per  cent  of  the  whole  world's  output,  drop 
nearly  twenty-five  per  cent  in  only  six  years, 
in  their  yield  per  milled  ton,  the  fact  that 
known  deposits  of  gold  move  toward  exhaus- 
tion is  in  evidence. 

(b)  — The  great  and  steady  annual  increase 
in  world  output,  begun  in  the  nineties  and  con- 
tinued until  recently,  was  caused  mainly  by 
the  invention  of  the  cheap  cyanide  and  chlo- 
rination  processes  for  extracting  gold  and  the 
general  perfecting  of  the  extractive  process. 
So  great  were  the  improvements  of  the  last 
quarter  of  the  nineteenth  century  that  it  be- 
came highly  profitable  to  work  over  the  dump 
heaps  of  some  of  the  older  mines  and  it  be- 
came, for  the  first  time,  at  all  possible,  profit- 
ably, to  operate  such  a  low  grade  property  as 
the  now  famous  Treadwell  mine. 

Over  ninety  per  cent  of  the  gold  is  now  re- 
covered from  even  the  most  refractory  ores, 
so  that  there  is  little  more  gold  left  in  present- 
day  dump  heaps  than  can  be  found  in  sea 
water.  The  limit  of  perfected  processes  is 
being  approximated  and  it  is  altogether  un- 
likely that  the  coming  generation  will  make 


128  The  Cost  of  Living 

improvements  either  in  mining  gold  ore  or  in 
modes  of  extraction  of  gold  which  will  even 
begin  to  offset  the  exhausting  of  the  known 
gold  fields. 

The  only  likely  means  of  appreciably  in- 
creasing the  world's  annual  output  in  coming 
years  will  be  the  discovery  of  new  gold  fields. 
No  one  can  foresee  what  may  happen  to  the 
lucky  prospectors  of  tomorrow.  Possibly  a 
new  Klondike,  or  a  new  California  area,  may 
be  found  within  a  twelvemonth,  anywhere  in 
those  great  gold-hearted  ranges  of  mountains 
from  Alaska  to  Cape  Horn.  Possibly  there 
is  a  second  Rand  country,  hidden  nearer  the 
heart  of  Africa,  which  may  be  hurrying  its 
heavy  gold  to  the  tills  of  exchange  within  the 
coming  decade.  But  just  as  possibly,  the 
world  may  move  on  for  another  long  genera- 
tion without  the  discovery  of  a  single  new 
important  field,  just  as  it  did  after  the  very 
antipodes,  California  and  Australia,  almost  si- 
multaneously maddened  the  gold-seeking  world 
with  their  new  treasures,  in  the  middle  of  the 
nineteenth  century. 

At  least  it  can  be  clearly  affirmed  that,  un- 
less important  new  extensive  and  rich  gold 
deposits  are  discovered,  all  signs  indicate  that 
the  gold  producing  world  will  have  difficulty, 


Remedies  129 

in  coming  years,  even  to  equal  its  records  for 
recent  years. 

■(c)  — The  third  natural  check  upon  increase 
of  annual  output  of  gold  is  the  very  cheap- 
ening of  gold  itself.  That  is,  labor,  machin- 
ery, food  —  all  the  items  of  service  and  supply 
necessary  to  the  working  of  a  gold  mine — are 
rising  in  gold  cost.  For  example,  if  ten  years 
ago  it  took  thirty  ounces,  out  of  every  hun- 
dred secured,  in  a  given  mine  to  pay  the  costs 
of  mining  and  reducing,  today  it  will  take 
probably  forty  to  forty-five  ounces  out  of 
every  hundred,  supposing  that  the  ore  still 
runs  as  richly  and  easily  and  that  no  important 
changes  in  process  have  been  made.  And  with 
the  same  assumptions,  if  the  prices  of  labor 
and  mining  supplies  should  rise  twenty-five  per 
cent  higher  in  the  next  ten  years,  it  would  then 
take  fifty  to  sixty  ounces  out  of  every  hundred 
mined  to  pay  the  mere  running  expenses  of  the 
mine.  The  profit  margin  in  the  obtaining  of 
gold  thus  steadily  decreases  as  the  prices  rise. 
This  means  that  mines  which  were  barely  prof- 
itable to  work  ten  years  ago  are  not  profitable 
to  work  today,  even  supposing  that  they  yield 
just  as  much  gold  for  given  labor  applied. 
Such  mines  will  be  abandoned  and  to  that  ex- 
tent the  world's  supply  for  the  next  year  will 


130  The  Cost  of  Living 

be  lessened.  Every  considerable  increase  in 
prices  will  add  to  the  number  of  abandoned 
mines  and  to  the  abandoning  of  the  poorer 
veins  of  mines  whose  better  ores  may  still  be 
worked  profitably. 

Successful  gold  mining  is,  then,  its  own 
worst  enemy,  and,  because  it  forces  world 
prices  upward,  it  automatically  checks  its  own 
activity.  This  check,  though  slow  and  never 
spectacularly  obvious  in  action,  is  none  the  less 
a  steady  and  a  real  check  upon  increased  world 
gold  production.  Taken  in  connection  with 
the  natural  exhaustion  of  the  better  ores  and 
the  greater  expense  attaching  to  mining  in 
deeper  shafts,  it  makes  strongly  for  diminish- 
ing profit  returns  from  all  older  mines. 

5.  Diminishing  Ratio  of  Annual  Gold  Output 

To  the  consideration  of  these  actual  checks 
upon  the  total  annual  product  mined,  there 
should  be  added  consideration  of  the  fact  that 
the  world's  total  stock  of  gold  is  steadily  grow- 
ing. Year  by  year,  larger  and  larger  amounts 
must  be  mined  if  the  ratio  of  new  gold  to 
stock  of  gold  on  hand  is  to  be  maintained. 
For  example,  if  the  total  stock  of  world  gold 
today  is  worth  $15,000,000,000,  then  $450,- 


Remedies  131 

000,000  of  new  gold,  mined  in  the  coming 
year,  would  increase  the  world's  stock  by  three 
per  cent.  But  if  this  annual  gold  increase 
of  $450,000,000  were  continued  for  less  than 
thirty-four  years,  the  stock  of  world  gold 
would  then  be  $30,000,000,000.  A  new  gold 
output  of  $450,000,000,  for  the  thirty-fifth 
year  would  then  be  an  increase  of  only  one 
and  one-half  per  cent.  That  is,  the  pressure 
for  increased  prices,  due  to  gold  increase  alone, 
would  be  only  one-half  as  great  for  the  thirty- 
fifth  year  as  for  the  first  year,  the  actual 
amount  of  gold  increase  being  the  same  for 
each  of  the  years.  On  this  account  alone,  un- 
less the  actual  annual  output  of  gold  continues 
steadily  to  increase,  by  1930  or  1940  the  ratio 
of  annual  gold  increase  to  gold  stock  on  hand 
will  he  so  small  that  the  increased  volume  of 
world  business  will  probably  overtake  the  in- 
creased money  service  and  general  prices  will 
cease  to  rise.  But  the  actual  checks  upon  in- 
creased gold  supply  show  it  to  be  problematic, 
if  not  improbable,  that  the  present  world  gold 
output  will  even  be  steadily  maintained.  If 
the  present  annual  gold  output  should  be  cur- 
tailed appreciably,  in  approaching  years,  so 
much  the  sooner  will  the  time  come  when  gen- 
eral prices  will  cease  to  rise. 


132  The  Cost  of  Living 

4.  Perfecting  and  Extending  Exchange 
Machinery 

Great  increase  in  the  world's  stock  of  gold 
has  the  effect  that,  within  a  given  time,  more 
money  service  will  be  rendered,  the  exchange 
system  remaining  the  same.  And,  likewise, 
great  improvement  in  the  exchange  machinery 
has  the  effect  that,  within  a  given  time,  more 
money  service  will  be  rendered,  the  stock  of 
gold  remaining  the  same.  In  either  case  the 
change  makes  for  rising  prices. 

The  exchange  machinery  may  become  more 
perfect  either  by  invention  of  new  appliances 
and  methods,  or  by  extending  the  use  of  im- 
portant older  appliances  or  methods. 

Every  new  acceleration  of  communication  or 
of  transportation,  every  newly  found  short 
cut  in  accountancy,  every  betterment  of  the 
mercantile  credit  system,  every  invention  of 
means  more  generally  to  mobilize  the  banking 
reserves  of  a  nation,  enables  one  gold  dol- 
lar to  be  the  adequate  reserve  for  a  larger 
amount  of  business  done  within  a  given  time. 
The  new  Federal  Reserve  Act  is  but  a  large 
scale  improvement  in  exchange  machinery.  Its 
centralization  of  the  nation's  banking  reserves 
and  its  note  issue,  on  commercial  paper,  are 


Remedies  133 

simply  grand  scale  extensions  of  money  serv- 
ice, enabling  a  given  gold  reserve  to  support 
a  large  volume  of  trade.  In  this  generation 
of  notable  applications  of  science  to  business, 
the  generation  of  efficiency  engineers,  the  great 
probability  is  that  further  and  important  im- 
provements in  exchange  machinery  will  con- 
tinue to  be  made  year  after  year.  Such  im- 
provements will  range  all  the  way  from  per- 
fected adding  machines  to  swifter  ocean  grey- 
hounds and  from  township  improvement  of 
highways  to  national  betterment  of  taxation 
and  money  and  banking  systems. 

Extension  of  well-tried  older  improvements 
will  also  play  a  highly  important  role.  The 
coming  generation,  for  example,  will  probably 
see,  perhaps  reaching  throughout  the  commer- 
cial world,  a  far  extension  of  the  bank  check 
system,  so  widely  developed  in  the  United 
States  during  the  past  generation.  It  has  been 
estimated  that  over  ninety  per  cent  of  the  busi- 
ness settlements  in  the  United  States  are  made 
in  bank  checks.  If  the  coming  generation 
should  see  the  checking  system  as  freely  used 
throughout  the  commercial  world  as  it  is  used 
today  in  the  United  States,  that  case  of  the 
extension  in  the  use  of  an  older  improvement 
in  exchange  machinery  would  alone  greatly  in- 


134  The  Cost  of  Living 

crease  the  volume  of  business  which  could  be 
transacted  with  a  given  gold  reserve. 

Many  other  exchange  improvements,  known 
in  the  leading  commercial  nations  for  years 
perhaps,  will  gradually  be  adopted  by  the  more 
backward  peoples.  Hottentots  may  be  found 
ordering  hairbrushes  by  telephone,  and  Fiji 
Islanders,  whose  great-grandfathers  wearied 
mentally  if  they  attempted  to  count  five,  may 
be  found  hammering  out  bank  balances  on 
Burroughs  adding  machines.  It  is  entirely 
within  the  range  of  possibility  that  the  great 
Chinese  people,  only  yesterday  seemingly  fixed 
for  all  time  in  the  rigid  mold  of  patriarchalism 
which  deified  changelessness,  may  tomorrow 
be  instructing  the  commercial  leaders  of  the 
world  in  the  use  of  their  latest  improvement 
in  machinery  of  exchange. 

5.  Expanding  Volume  of  Trade 

The  other  side  of  the  scale  holds  the  volume 
of  business.  Is  the  volume  of  exchanges  likely 
to  surpass  its  record  of  past  years? 

Steady  increase  of  world  population  means 
steady  increase  of  the  labor  force  of  the 
world.  The  modern  organization  of  industry 
has  been  effective  in  massing  a  greater  and 
greater  volume  of  capital.    Fast  as  poulation 


Remedies  135 

has  grown,  capital  has  grown  still  faster  in 
the  leading  commercial  nations.  For  example, 
the  population  growth  of  the  United  States 
has  been  phenomenal  and  yet,  while  the  popu- 
lation of  the  United  States  rose  from  a  little 
over  twenty-three  million  in  1850  to  a  little 
over  eighty-two  million  in  1904,  the  estimated 
wealth  of  the  United  States  rose  from  seven 

« 

to  a  hundred  and  seven  billions  of  dollars  in 
the  same  period.  Wealth  multiplied  by  more 
than  fifteen  while  population  multiplied  by 
less  than  four. 

Natural  science  is  continually  perfecting  the 
productive  process  on  the  mechanical  side,  and 
business  science  is  perfecting  it  on  the  labor 
organization  and  management  sides.  So  given 
labor  and  given  capital  are  made  daily  more 
fruitful  in  goods.  Nor  is  it  time  to  say  the 
greatest  is  past.  Wbnderful  as  have  been  the 
mechanical  and  the  organization  improvements 
in  the  world  of  production  during  the  past 
century,  it  is  entirely  possible  that  one  genera- 
tion to  come  may  eclipse  even  that  century. 
It  may  seem  foolishly  optimistic  to  suggest 
that  the  great  century  which  first  importantly 
applied  steam  and  electricity  and  with  them 
mastered  land,  sea,  and  air,  should  ever  again 
be  equaled  by  any  century  to  come.    Yet,  won- 


136  The  Cost  of  Living 

derful  as  have  been  the  mechanical  and  organ- 
ization improvements  of  means  of  production 
during  the  past  century,  and  wide  and  fer- 
tile as  have  been  the  new  areas  it  has  added 
to  the  producing  world,  it  is  entirely  possible 
that  one  generation,  of  the  near  future,  per- 
haps, may  eclipse  even  the  nineteenth  century 
in  productive  improvement. 

Who  can  forecast  the  future  of  synthetic 
chemistry?  When  the  story  has  just  been  told 
that  Thomas  Edison  has  this  very  year  built 
and  equipped  a  great  laboratory  which  is  sup- 
plying his  record  plant  with  tons  of  syntheti- 
cally produced  carbolic  acid,  it  is  time  for  the 
world  to  await  breathlessly  the  next  hour's 
report  from  the  synthetic  chemist.  Rubber 
has  been  so  produced,  why  not  flour?  Gems 
have  been  so  produced,  why  not  sugar  ?  That 
the  cost  in  practically  all  these  synthetic  proc- 
esses has  been  prohibitive  of  production  for 
the  market  means  nothing,  except  that  organiz- 
ing business  brains  and  energy,  such  as  those 
at  Thomas  Edison's  command,  must  turn 
themselves  to  the  practical  problem.  Carbolic 
acid  had  been  synthetically  produced  before 
by  several  different  methods.  When  the  war 
cut  Mr.  Edison  off  from  his  customary  sup- 
ply of  that  acid  from  Germany,  he  seized  upon 


Remedies  137 

these  synthetic  methods,  chose  one  of  them, 
and  in  less  than  a  month  was  producing  the 
acid  commercially. 

The  generation  which  succeeds  in  produc- 
ing flour  and  meal  and  sugar  and  wine, 
cheaply,  by  a  synthetic  process,  will  have  made 
a  vastly  more  important  step  ahead  in  world 
production  than  the  nineteenth  century  made 
when  it  added  the  Mississippi  Valley  and  the 
Canadian  and  South  American  plains  to  the 
world's  producing  areas. 

New  applications  of  power,  too,  are  con- 
ceivable. That  man  who  succeeds  in  tapping 
directly  Nature's  reservoirs  of  electrical  energy 
will  increase  the  world's  productivity  more  by 
this  one  step  than  all  the  steam  and  electrical 
devices  to  date  have  increased  it.  And  why 
may  this  not  come  to  pass?  Why  resort  to 
the  expensive,  roundabout  processes  of  feeding 
the  furnace  to  run  the  machine  to  generate 
electrical  energy,  or  why  resort  even  to  the 
less  expensive  process  of  harnessing  falling 
water  to  generate  electrical  energy,  when  there 
are  probably  veritable  oceans  of  electrical 
power  already  generated?  Some  one  will  find 
the  way,  and  what  an  Aladdin  vista  will  be 
opened!  Steam  engines  will  go  to  the  junk 
heap  or  to  the  museum,  coal  mines  will  close 


138  The  Cost  of  Living 

forever  and  will  release  their  millions  of  slav- 
ing men.  All  the  millions  of  workers  released 
from  the  mines,  from  the  making  of  machines 
for  mining  and  from  the  distributing  of  coal, 
will  be  so  much  labor  to  be  added  to  other 
lines  of  production. 

The  ghastly  Malthusian  specter  of  starva- 
tion, conjured  again  by  realization  that  the 
United  States  has  already  exploited  its  richest 
resources,  may  be  banished  anew  and  for  cen- 
turies, by  the  synthetic  chemist  and  by  the 
greatest  of  discoverers  and  explorers,  those 
men  who,  in  this  twentieth  century,  may  find 
and  chart  vast  electrical  seas. 

These  are  but  suggestions  of  the  possibili- 
ties of  increased  production  open  to  this  twen- 
tieth century.  They  are  listed  here,  not  as 
fantastic  imaginings,  but  as  perfectly  serious 
scientific  forecasts  of  lines  along  which  the 
men  of  tomorrow  will  so  increase  production 
as  to  surpass  the  marvelous  achievements  of 
the  last  century. 

Then,  too,  the  greatest  of  the  world's  popu- 
lations are  just  beginning  to  use  modern 
power-driven  machinery.  When  twenty  mil- 
lion tireless  Chinese  workers  are  turning  out 
goods  with  the  aid  of  the  latest  machinery 
and  the  newest  methods,  they  will  be  multi- 


Remedies  139 

plying  their  present  product  many  fold.  When 
India  equips  herself  with  modern  machinery, 
the  volume  of  the  world's  goods  will  be  notably 
increased.  Combined,  these  two  peoples  con- 
stitute fully  a  third  of  the  world's  population 
and  they  are  both  moving  rapidly  towards  in- 
dustrialization in  occidental  terms. 

When  such  large  items  as  the  possible  de- 
velopment of  synthetic  chemistry,  the  direct 
utilization  of  Nature's  own  electrical  seas,  and 
the  steady  and  probably  rapid  industrialization 
of  China  and  India  are  considered  along  with 
the  normal  expectancy  of  thousands  of  new 
appliances  and  methods  and  the  steady  growth 
of  the  whole  world's  labor  force  and  capital 
volume,  there  can  be  no  doubt  that  the  world's 
volume  of  exchanges  will  increase  greatly  in 
the  decades  just  ahead.  Here  again  no  man 
can  know.  All  that  can  be  said  is  that  the 
elements  making  for  an  increased  volume  of 
exchanges  are  so  important  that  the  volume 
of  exchanges  may  easily  overtake,  in  its  in- 
crease, the  increase  of  gold  supply,  reinforced 
by  even  very  great  improvements  in  the  gen- 
eral machinery  of  exchange. 

It  is  entirely  within  the  possibilities  of  the 
case  that  prices  may  rise  more  and  more  slowly 
until  not  many  years  ahead  will  see  the  culmina- 


140  TJie  Cost  of  Living 

tion  of  this  rising  price  epoch.  Unless  very 
wonderful  new  gold  fields  are  discovered 
within  the  next  twelve  or  fifteen  years,  it  may 
happen  that  the  historian  of  2000  A.  D.  will 
write,  "  Prices  rose  generally  throughout  the 
commercial  world  from  1897  ^^til  1925." 

6.  Effect  of  the  World  War  on  Prices 

The  great  world  war  now  raging  makes 
fundamentally  for  higher  prices.  If  it  is  of 
long  duration,  it  may  appreciably  influence  the 
price  level  of  the  next  decade.  Cities  are  be- 
ing shattered,  thousands  of  square  miles  of 
fertile  country  flooded  and  otherwise  devas- 
tated, and  billions  of  wealth  are  being  burned 
by  the  contending  gunners.  And  one  short 
year  will  count  three  million  dead!  In  cold, 
economic  terms,  this  means  the  next  genera- 
tion will  have  appreciably  less  capital  and  la- 
bor than  it  would  have  had  if  the  most  civil- 
ized of  the  continents  had  not  suddenly  gone 
mad.  The  world  over,  too,  business  is  seri- 
ously disrupted.  All  this  means  that  the  vol- 
ume of  exchanges  will  be  smaller  in  coming 
years  than  it  would  have  been  if  world  indus- 
try had  steadily  advanced,  in  peace.  However, 
unless  the  war  is  greatly  protracted,  or  unless 
its  area  of  land  operations  is  greatly  extended, 


Remedies  141 

even  some  billions  of  capital  and  some  mil- 
lions of  men  may  drop  out  of  the  commercial 
world's  huge  business  marts  without  greatly 
affecting  the  price  ranges  for  more  than  a  few 
years  at  most. 

7.  Offsets  to  Losses  Through  Rising  Prices 

The  facts  that  there  are  great  world  gains 
due  to  rising  prices  and  that  rising  prices  have 
their  natural  checks  do  not  in  the  least  change 
the  further  fact  that  the  great  wage-earning 
groups  tend  to  be  losers  in  a  rising-price  pe- 
riod. Public  bureaus  of  statistics  in  democ- 
racies should  be  especially  alert  in  such  periods 
and  should  keep  the  public  informed  as  fully 
as  possible  as  to  the  changing  wholesale  and 
retail  prices  and  the  course  of  wages.  The 
general  public  should  bear  in  mind  these  re- 
turns. If  wages  are  seen  to  be  lagging  but 
little  behind  prices  as  they  rise,  then  the  rising 
price  era  is  substantially  beneficial  altogether. 
As  a  class,  wage  earners  will  have,  in  greater 
constancy  of  employment,  a  full  offset  for 
somewhat  lagging  wages.  But  if  the  gap  be- 
tween the  price  rise  and  wage  rise  yawns  wide, 
if  it  is  a  growing  gap,  then  public  opinion 
should  be  strongly  and  clearly  favorable  to- 
wards wage  earners'  claims  for  increase.  Price 


142  The  Cost  of  Living 

and  wage  data  gathered  and  tabulated  scien- 
tifically should  be  the  very  pith  of  the  argu- 
ment to  the  arbitrators  who  are  to  decide 
whether  the  conductors  or  the  firemen,  the 
miners  or  the  weavers  are  entitled  to  a  rise  in 
wage.  Any  prosperity  would  be  hollow  indeed 
which  steadily  inroaded  living  standards  of 
wage  earners.  This  seems  to  be  the  danger 
point.  Straight  general  publicity  of  the  essen- 
tial wage  and  price  rise  facts  will  do  more  to 
safeguard  at  this  danger  point  than  a  dozen  of 
the  patent  medicine  variety  of  remedies  all 
applied  at  once. 

The  general  stimulus  to  social  betterment 
due  to  the  pressure  of  rising  prices  may  well 
be  used  to  advantage  by  all  friends  of  man. 
This  is  a  good  time  to  back  a  good  cause. 
The  general  system  for  the  distribution  of 
goods  is  badly  out  of  gear,  and  this  is  the 
time  to  get  it  into  better  gear.  This  is  the 
time  for  mayors  and  aldermen  and  borough 
presidents  and  commissioners  to  be  trying  out 
public  markets  and  bettering  docks  and  im- 
proving traffic  connections  and  prosecuting  re- 
lentlessly users  of  false  scales  and  scant  meas- 
ures. This  is  the  time  for  great  newspapers 
to  throw  the  spot  light  fearlessly  on  purvey- 
ors of  rotten  and  adulterated  foods  and  wares 


Remedies  143 

and  to  teach  the  public  where  and  what  and 
how  to  buy.  This  is  the  time  for  large  corpo- 
rations whose  leaders  have  wakened  to  the 
greater  joy  of  service,  to  establish  shops  and 
markets  open  to  the  voluntary  trading  of  their 
own  employees.  This  is  the  time  for  house- 
wives to  league  themselves  for  study  of  the 
retail  markets  and  for  cooperative  buying. 
This  is  the  time  for  publicists  to  reform  the 
tariff  and  the  patent  systems  and  to  abolish 
factor's  agreements.  This  is  the  time  for 
schools  and  colleges  to  train  the  men  and 
women  of  tomorrow  in  the  practical  arts,  in 
knowledge  of  markets,  savings  systems,  food 
values,  laws  of  personal  and  public  hygiene, 
and  in  the  business  and  civic  and  aesthetic  sci- 
ences. This  is  the  time  for  all  men  and  women 
to  eschew  the  bizarre  and  the  pretentious  and 
the  shifting  styles  and  fabrics  dictated  by 
profit-hunting  makers  of  goods  and  garments 
and  to  select  according  to  their  own  tastes 
and  means  the  comely,  the  genuine  and  the 
lasting.  This  is  the  time  for  the  general  electo- 
rate to  insist  upon  wiser  adjustment  of  the 
tax  burdens  and  wiser  expenditure  of  the  pub- 
lic funds. 

On  the  side  of  extractive  production  are 
many    opportunities.       Social    action    again 


144  The  Cost  of  Living 

should  be  guided  by  the  price  returns.  Our 
facts  show  us  that  basic  cereals  and  meat  and 
lumber  have  risen  far  more  rapidly  than  gen- 
eral commodity.  Honor,  then,  to  the  state 
which  so  stimulates  its  farm  lads  that  this 
year's  winner  recorded  nearly  154  bushels  of 
shelled  corn  from  one  acre  —  over  five  times 
the  country's  average.  This  is  the  time  for 
states  and  counties  to  spend  less  on  the  sorry 
little  midways  and  the  unconvincing  profes- 
sional horse  racing,  at  their  fairs,  and  to 
spend  more  in  making  it  worth  while  for  their 
citizens  to  breed  good  stock,  raise  prize 
peaches,  and  set  yearly  new  records  for  corn 
and  wheat  and  potatoes.  This  is  the  time  for 
corporation,  state  and  nation  to  safeguard  the 
hills  and  woods,  to  irrigate,  to  drain,  to  con- 
nect up  important  waterways  by  canals,  to 
plant  young  trees,  to  establish  lines  of  com- 
munication and  transport  which  will  open  new 
lands  and  make  accessible  new  resources. 

This  is  the  time  for  the  state  to  perfect  the 
insurance  and  banking  systems,  to  prosecute 
relentlessly  thieving  promoters  of  get-rich- 
quick  schemes  and  to  control  closely  stock  and 
bond  issues,  all  in  the  interest  of  promoting 
thrift  and  of  increasing  capital  and  of  raising 
the  standards   of  trustee  morality.     So,   in 


Remedies  145 

countless  ways,  individuals,  private  organiza- 
tions, and  civic  bodies  may  labor  for  the  better 
modes  of  producing  and  distributing  wealth 
and  for  the  saner  uses  of  wealth,  public  and 
private.  Every  consumer  in  the  land,  whether 
wage  earner  or  bond  holder,  will,  as  a  con- 
sumer, be  benefited  by  any  such  improvements. 
But  let  it  not  be  overlooked  that  each  and 
all  of  these  plans,  many  of  them  not  infre- 
quently presented  as  remedies  for  rising  prices, 
are  just  as  desirable,  just  as  fitting  to  advocate 
and  to  promote  when  prices  are  standing  still 
or  when  prices  are  falling.  Such  activities 
should  be  urged  because  they  will  make  for 
public  welfare,  regardless  of  the  course  of 
prices.  They  should  be  promoted  as  positive, 
constructive  means  to  better  the  lot  of  the 
average  man  at  any  and  all  times,  rather  than 
as  negative  mere  offsets  to  alleged  causes  of 
rising  prices. 

8.  'Arbitrary  Means  to  Stop  General  Rise  of 
Prices 

Thus  far  this  chapter  has  outlined  the 
probable  future  of  the  rising  price  period  in 
view  of  natural  checks  to  the  basic  causes  and 
has  suggested  a  wide  range  of  means  to  lessen 
the  losses  through  steadily  rising  prices,  par- 


146  The  Cost  of  Living 

ticutarly  those  visited  upon  wage  earners.  In 
this  list  of  means  has  been  included  those  arbi- 
trary means  which  may  be  applied  to  lower 
prices  where  price  levels  are  high  because  of 
protective  tariffs,  extravagance,  monopolies 
and  the  like,  causes  which,  at  all  times,  whether 
general  prices  be  rising  or  falling,  operate  to 
keep  the  level  of  prices  somewhat  higher  than 
it  would  otherwise  be.  It  remains  necessary  to 
the  completion  of  this  survey  of  the  problem 
of  rising  price,  to  deal  briefly  with  leading 
artificial  means  proposed  as  adequate  to  stop 
the  general  rise  of  price. 
'  Five  such  means  may  be  treated  briefly: 

(a) — Let  the  primary  money  medium  of 
the  world  be  changed.  Let  the  world  adopt 
some  other  metal  not  cheapening  so  rapidly  as 
gold. 

This  suggestion  seems  to  be  fatally  weak. 
Gold  has  come  to  be  the  world's  primary 
money  metal  through  long  evolution.  Many 
other  things,  wheat,  pease,  eggs,  camels,  to- 
bacco, slaves,  salt,  cloth,  and  baser  and  more 
precious  metals  than  gold,  have  all  been  tried. 
Gold  has  slowly  won  out  as  the  money  medium 
possessing  to  the  highest  degree  all  of  the 
characteristics  essential  for  modem  commerce. 


Remedies  147 

It  is  durable,  portable,  divisible,  impressible, 
homogeneous,  cognizable  and  steady  in  value 
to  degrees  not  equalled  by  any  other  money 
medium  which  society  has  so  far  tested.  The 
only  issue  is  the  changing  value  issue.  Gold 
satisfies  all  the  other  tests  for  good  money 
well  nigh  perfectly.  Changes  in  value  of  gold 
are  as  slow  and  'as  steady  as  those  of  any 
known  thing.  There  is  no  reason  for  believ- 
ing that  any  other  medium  substituted  for 
gold  as  the  world's  money  medium,,  might  not 
change  in  value  more  rapidly  and  more 
capriciously  than  does  gold.  When  all  the 
shattering  uncertainties  to  world  business  and 
all  the  heavy  expense  to  be  caused  by  any 
change  in  the  world  primary  money  medium 
are  considered,  in  addition  to  the  fact  that, 
after  evolution  of  some  thousands  of  business 
years,  gold  has  survived  as  the  fittest  of  world 
money  media,  does  it  not  become  clear  that 
the  blithe,  offhand,  "  Just-change-f rom-gold- 
to-some-other-money-medium  "  solution  is  un- 
convincing, if  not  altogether  superficial  and 
thoughtless  ? 

(b) — The  proposal  to  do  away  altogether 
with  a  primary  money  of  redemption  and  to 
resort  directly  to  fiat  money  is  made.  It  is 
argued  that  the  supply  of  paper  money,  issued 


148  The  Cost  of  Living 

directly  by  the  government,  could  be  adjusted 
arbitrarily  to  the  expansions  or  contractions 
of  the  volume  of  trade.  The  history  of  the 
paper  money  of  the  nations,  at  the  periods 
when  it  became  inconvertible  and  therefore 
approximated  the  fiat  type  of  money,  is  a  his- 
tory of  such  financial  distresses,  business  un- 
certainties and  public  and  private  dishonors, 
in  direct  connection  with  the  inconvertible 
paper  money,  that  he  who  runs  should  be  able 
to  read.  The  ills  of  present  rising  prices  are 
of  a  genially-warm  frying  pan  variety  com- 
pared to  a  white-hot  fire  of  price  disasters 
likely  to  prevail  under  any  fiat  money  system. 
Furthermore,  unless  all  the  nations  agreed 
upon  a  fiat  money  for  the  whole  world,  any 
nation  adopting  a  fiat  money  would  be  com- 
pelled, in  settlement  of  international  trade 
balances,  to  use  some  medium  having  value. 
The  fiat  money  scheme  seems  to  be  one  of 
those  dream  logic  systems  which  solves  every 
money  difficulty  just  so  long  as  it  is  assumed 
to  be  applied  among  millennial  men  and  under 
millennial  conditions.  Disregarding  all  history 
and  assuming  all  men,  and  especially  public 
officials,  to  be  gods  in  intelligence  and  self 
control  and  angels  in  character,  a  fiat  money 
system  would   work  beautifully.     But  since 


Remedies  149 

history  is  man's  one  best  guide  and  since  man 
must  be  confessed  to  be  somewhat  less  than 
the  gods,  somewhat  lower  than  the  angels,  the 
proposal  to  adopt  fiat  money  as  a  cure  for  the 
relatively  slight  ills  of  rising  prices,  must  be 
classed  as  a  visionary  project  of  unreason. 

(c) — It  has  been  proposed  that  govern- 
ments should  compel  all  business  settlements 
to  be  made  directly  in  gold.  This  would  abol- 
ish most  of  the  modern  machinery  of  ex- 
change. Strictly  interpreted,  it  would  make 
a  bank  a  place  for  the  deposit  of  gold  only, 
and  a  place  from  which  a  borrower  would  take 
gold  only.  All  transfer  through  book  credits, 
all  payments  by  paper  money  and  checks  and 
drafts  and  bills  of  exchange  would  cease.  It 
proposes  that  society  should  well-nigh  de- 
molish its  marvellous  exchange  machine  be- 
cause that  machine  is  operating  so  well.  It 
proposes  that  society  should  revert  in  sub- 
stance to  medieval  barter  conditions,  because 
a  part  of  the  people  have  suffered  some  loss 
of  real  income  during  the  past  few  years.  This 
amounts  to  proposing  that  the  business  world 
should  cut  off  an  arm  to  cure  a  hang-nail. 

(d)  — One  of  the  most  persuasive  plans  for 
preventing  rise  of  prices  has  been  recently 
proposed    by    Professor    Irving   Fisher.      In 


150  The  Cost  of  Living 

operation  it  would  amount  to  a  compulsory- 
adoption  of  a  multiple  standard  system  in 
all  business  settlements.  The  instrument 
to  accomplish  this  is  a  "compensated  dol- 
lar." 

The  actual  standard  dollar  of  the  United 
States  is  to  remain  just  what  it  is  now  —  a 
gold  coin  containing  23.22  grains  of  pure  gold. 
Professor  Fisher  proposes  that  after  the  adop- 
tion of  his  plan,  those  who  bring  gold  to  the 
United  States  government  should  be  required 
to  give,  for  each  dollar  of  gold  money  paid  to 
them,  23.22  grains  of  gold  bullion  increased 
by  the  percentage  by  which  general  commodity 
prices  had  risen  since  some  fixed  time  for 
initiating  his  plan.  For  example,  had  his  plan 
been  in  operation  since  the  nineties  and  had 
general  commodity  prices  risen  thirty  per  cent 
from  the  year  at  which  his  plan  was  installed 
until  1913,  then  in  1913,  to  get  a  gold  dollar 
any  one  would  have  to  bring  gold  bullion 
weighing  130  per  cent  of  23.22  grains  or 
30.186  grains.  Professor  Fisher  argues  that, 
since  the  government  would  buy  gold  bullion 
on  this  new  basis  only,  every  dollar  of  United 
States  gold  money  would,  therefore,  become 
virtually  30.186  grains  of  gold.  The  actual 
standard  dollar,  by  yielding  to  the  "compen- 


Remedies  151 

sated  dollar,"  thus  is  to  absorb  the  full  shock 
of  upward  price  pressure,  and  general  com- 
modity price,  year  by  year,  will  be  kept  at 
exactly  the  same  level. 

This  ingenious  plan  assumes  highly  de- 
pendable accuracy  in  the  gathered  price  data, 
justifying  changes  in  the  "virtual  dollar" 
when  very  small  general  commodity  price 
changes  are  registered.  It  involves  a  series  of 
stxcessive  re-adjustments  of  business  exchange 
to  new  dollars.  It  could  not  be  applied  to 
cover  a  reaction  of  general  prices  below  the 
level  of  the  initial  period.  Most  serious  of  all, 
it  practically  proposes  that  the  United  States 
government  should  cease  to  have  a  primary 
money  whose  bullion  value  is  its  monetary 
value.  That  is,  the  United  States  would  cease 
to  have  a  real  money  of  redemption.  This 
redemption  matter  is  the  danger  point  of  the 
whole  system  even  now,  and  to  propose  to 
make  even  gold  coins  token  money,  to  any  per 
cent  to  which  prices  might  rise,  is  to  propose 
a  very  serious  and  questionable  change. 

(e) — Arbitrary  action  by  the  governments 
might  take  the  form  of  limiting  the  annual 
output  of  new  gold.  Such  a  plan,  at  least, 
proposes  to  make  the  punishment  fit  the  crime. 
The  gold  exchange  system  offends  by  causing 


152  The  Cost  of  Living 

prices  to  rise,  therefore  decrease  the  gold  out- 
put sufficiently  to  prevent  the  rise.  The  prac- 
tical difficulties  in  the  way  of  carrying  out 
such  a  plan  are  considerable.  It  would  require 
difficult  determination  of  the  total  world 
amount  of  new  gold  desirably  to  be  mined  each 
year,  of  the  gold  mining  firms  or  individuals 
to  be  limited,  and  their  degrees  of  limitation. 
It  would  require  elaborate  and  honest  policing 
to  enforce  the  limitations.  Appreciably  to 
curtail  the  world's  output  of  gold,  without 
very  great  hardship  upon  the  gold  producers 
of  any  one  country,  would  require  enforcement 
of  limitations  in  at  least  three  countries,  Aus- 
tralia, South  Africa,  and  the  United  States. 
However,  these  difficult  practical  problems 
doubtless  could  be  solved  if  the  need  were 
pressing.  This  actual  limitation  to  the  in- 
crease of  the  world's  new  gold  seems  to  be 
the  one  means  open  to  the  commercial  world 
effectively  to  control  the  actual  course  of  gen- 
eral prices  without  incidentally  producing 
other  results  vastly  worse  than  the  ill  whose 
remedy  is  sought. 

Before  any  nation  is  justified  in  resorting 
to  one  of  the  above  or  to  any  other  artificial 
methods  of  preventing  general  price  rise,  two 
propositions  need  to  be  established  clearly: 


Remedies  153 

(a) — That  generally  rising  prices  cause 
much  more  bad  than  good. 

(b) — That  general  prices  will  continue  to 
rise  considerably  for  a  long  time,  thus  con- 
tinuously increasing  the  excess  of  their  bad 
over  their  good  effects. 

Our  brief  survey  of  the  rising  price  prob- 
lem seems  to  show  that  neither  of  these  two 
propositions  is  yet  demonstrated. 


REFERENCES 

THE  following  few  reading  references  are 
merely  suggestive  to  the  general  reader 
who  may  desire  to  read  further  or  to  check  up 
leading  statistics : 

Annals  of  the  Academy  of  Political  and  Social  Science 

July,  1913,  "  The  Cost  of  Living." 
Fisher,   Irving.     Why  Is   the  Dollar  Shrinking f     The 

Macmillan  Company,  New  York.     1914. 
Fisher,  Irving.    The  Purchasing  Power  of  Money.  The 

Macmillan  Company.     191 1. 
Layton,  Walter  T.    An  Introduction  to  the  Study  of 

Prices.    The  Macmillan  Company.    1912. 
Nearing,  Scott.    Reducing  the  Cost  of  Living.    George 

W.  Jacobs  &  Co.,  Philadelphia.     1914. 
Rubinow,  I.  M.    Recent  Trend  of  Wages.     American 

Economic  Review.    December,  1914. 
Scott,  William  A.    Money.    A.  C.  McClurg  &  Co.,  Chi- 
cago, 1913. 
Report  of  the  Massachusetts  Commission  on  the  Cost 

of  Living.    Boston  State  Printers.    1910. 
Wages  and  Prices  of  Commodities.     Senate  Document 

No.  349,  61  St  Congress,  2d  Session.    Report  made  to 

the  United  States   Senate   February  3,   1910,  by  the 

Department  of  Commerce  and  Labor. 

For  current  statistical  data  on  cost  of  living 

and  wages  see  the  publications  of  the  United 

States  Bureau  of  Labor  Statistics,  particularly 

its  three  series  of  Bulletins  on  Wholesale  Prices, 

154 


References  155 

on  Retail  Prices,  and  Cost  of  Living,  and  on 
Wages  and  Hours  of  Labor;  Reports  and  Bulle- 
tins of  various  State  Bureaus  of  Labor  Statis- 
tics, especially  those  of  Massachusetts,  New 
York,  New  Jersey,  and  Ohio;  Canadian  Year 
Books  and  Labour  Gazettes;  Abstracts  of  La- 
bour Statistics  of  the  United  Kingdom;  Statis- 
tisches  Jahrbuch  fiir  das  Deutsche  Reich;  Labour 
Bulletins  of  the  Australian  Commonwealth  Bu- 
reau of  Census  and  Statistics,  and  similar  cur- 
rent reports  for  other  nations. 

Anyone  who  may  desire  to  consult  an  elabo- 
rate bibliography  is  referred  to  References  on 
the  Cost  of  Living  and  Prices,  by  the  Library 
of  Congress,  and  brought  up  to  1913  by  its  last 
Additional  References  on  these  subjects. 


Appendix  A 


157 


Relative  prices  weighted  according  to  the 
average  consumption  of  the  various  arti- 
cles of  food  in  workingmen's  families  In 
each  geographical  division. 

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158 


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From  Bulletin  of  the  United  Statea  Bureau  of 


Appendix  B  159 


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Labor  SttktUtlca,  1914.  Number  149.  p.  179. 


INDEX 


Abstracts  of  Labor  Statistics,  British  retail  food  prices, 

8;  course  of  British  wages,   io8,   109 
Adulterated  goods  and  high  prices,  33-35 
Africa,    density    of    population,    64;    gold    production, 

84,   152 
American  Federation  of  Labor,  43 
Army  and  navy,  cost  of,  75 
Australia,   density  of  population,  64;  gold  production, 

83,  152;  and  rising  prices,  95 
Austria,  rising  cost  of  living,  12 

Bank  check  system,  probable  extension  of,  133 

Banking  system,  to  be  perfected,  144 

Beef  and  hams,  prices  and  Trust,  56 

Beef  Trust  and  prices,  53,  56 

Belgium,  population  and  rising  prices,  64,  95 

Bonds  and  higher  prices,  110-114 

Boot  and  shoe  industry  and  wages,  42 

Business,  effect  of  higher  prices  on,  99,  100 

Business   settlements   in   gold,   149 

Canada,  retail  prices  in,  6-8;  wholesale  prices  in,  9-12; 
immigration  to  from  United  States,  25 ;  growth  in 
population,  62 

Cattle  product,  27-30;  diseases,  28;  prices,  29;  meat- 
packing industry,  41 

Cause  of  rise  in  prices,  21-23;  supply  causes,  24-60; 
demand  causes,  61-98;  population  and  immigration, 
64,  65 ;  speculation,  65-70 ;  extravagance,  70-76 ;  ris- 
ing standard  of  living,  76-82;  increased  gold  supply, 
82-98 

Chemistry,  synthetic,  wonderful  possibilities  of,  136-139 

China,  rising  cost  of  living,  12,  97;  goods  production, 
138,  139 

Coal,  exhaustion  of,  25-27;  prices,  29 

Coins,  representative  of  gold,   15;  use  of  gold  for,  85 

Cold  storage  and  high  prices,  35-37 

161 


I 62  Index 


Commodities,  relation  of  gold  to,  20,  21 ;  distribution  of, 
34;  eggs  and  cold  storage,  35-37;  of  non-union  pro- 
ducers, 38;  prices  of  and  tariff,  49;  prices  from  1890- 
1913.  53-55;  corners  in,  66;  gold  as,  87;  higher  prices 
of  and  wages,  104,  106;  relative  wholesale  and  retail 
price  tables,  156 

"Compensated  dollar,"  150,  151 

Consumer,  and  prices  for  protected  goods,  49,  50;  com- 
petition a  safeguard  for,  51 

Corn,  rise  in  price,  29 

Corners  in  wheat,  66,  67 

Crime,  74 

Crises,  may  accompany  rise  in  prices,  1 18-120 

Deaths  and  accidents  in  the  United  States,  74 

Debtors  and  creditors  and  rising  prices,   114 

Demand,  effect  on  prices,  16-18;  and  gold,  18-20;  de- 
mand causes  for  rise  in  prices,  23,  and  high  prices, 
61-98 

Dingley  revenue  act,  48 

Distribution  of  goods,  34,  35 

Dollar,  gold  in  the  standard  United  States,  14-16,  20; 
money  work,  86 

Drunkenness  and  waste,  71,  J2 

Edison,    Thomas,    discoveries    in    synthetic    chemistry, 

136,    137 
Eggs,  cold  storage  and  prices,  35-37;  Trusts  and  prices 

of.  55 ;  prices  related  to  gold,  88,  89 
Electrical  energy,  possible  applications  of,   137,  139 
Employers,  labor,  and  rising  prices,  99-109 
Encyclopedia  Britannica,  and  supply  and  demand,  17,  18 
England  and  Wales,  growth  of  population,  61,  62 
Exchange,    perfecting    the    machinery    of,    and    higher 

prices,   119,   125,   126,   132-134;   and   Federal  Reserve 

act,  132 
Exchanges,  world's  and  the  supply  of  gold,  87-91 ;  and 

Civil  War,  93 
Exhaustion  of  natural  resources  of  United  States,  24-30, 

75;  commodities  of  non-union  producers,  38 
Extravagance  and  high  prices,  70-76;  to  be  avoided,  143 

Farmers,  gains  to  in  rising-price  period,  114-116;  corn- 
winning,    144 


Index  163 


Farms,  value  in  the   United  States,    115;    freed   from 

mortgages,  116 
Fashion  and  cost  of  living,  72,  yjt)  evils  to  be  avoided, 

143 
Federal  Bureau  of  Labor  Statistics,  reports  on  prices, 

53-58,  104 
Federal  Reserve  act,  as  machinery  for  exchange,  132 
Fiat  money,  147-149 
Fisher,  Irving,  records  of  yearly  exchanges,  89-91 ;  plan 

to  stop  rising  prices,  149-151 
Fishermen,  gain  in  rising-price  period,  114,  115 
Food,  difference  in  cost  between  the  nineties  and  1913, 

1-6;  in  Canada,  6-8;  Great  Britain,  8,  9;  waste  of,  73; 

relative   wholesale   and   retail   price   tables,    156,    157; 

retail  prices  in  United  States,  106;  wholesale,  iii 
Flour,  imports  of  United  States  in  1898  and  1913,  27; 

possible  production  by  synthetic  chemistry,  137 
France,  growth  in  population,  61 ;  bond  price  decline, 

112 
Freight  rates  and  high  prices,  45-47 

Gardeners,  gain  in  rising-price  period,  114-116 

Germany,  rising  cost  of  living,  12;  growth  in  popula- 
tion, 61,  62;  prices  in,  95 

Gold,  the  value-measuring,  primary  money  unit,  14-16; 
subject  to  supply  and  demand,  18-20;  ratio  of  to  com- 
modities, 20,  21;  increased  supply,  82-98;  production, 
82,  83 ;  uses,  84,  85 ;  a  money  thing,  87 ;  increased  sup- 
ply fundamental  cause  of  rising  prices,  119,  125;  out- 
put of  the  Transvaal,  126,  127;  checks  on  increase, 
126-130;  world's  stock  of  growing,  130,  131;  world's 
primary  money  metal,  146,  147;  business  settlements 
in,  149;  arbitrary  action  to  limit  output,  151,  152 

Gold  dollar,  amount  of  gold  in  the  standard,  14-16,  20; 
money  work,  86;  and  larger  business,  132;  "compen- 
sated dollar,"  150,  151 

Government,  cost  of,  75 

Great  Britain,  free  trade  and  prices,  48;  wages  and  re- 
tail prices,  109;  bond  price  decline,  112 

Health  and  sickness  in  the  United  States,  74 

Higher  cost  of  living,  the  facts,  1-13;  differences  between 

nineties  and  present-day  prices,  i,  2;  in  Canada,  6-8; 

retail  in  the  United  States,  2-6;  Great  Britain,  8,  9; 

wholesale  prices,  9-12;  causes  of,  21-23;  supply  causes. 


164  Index 


24-60;  exhausting  natural  resources  causes,  24-30;  re- 
tailers' undue  profits,  30-33 ;  adulterated  goods,  33-35 ; 
bad  distribution  of  goods,  34,  35;  and  cold  storage, 
35-37;  and  labor  unions,  37-45;  and  transportation 
rates,  45-47;  and  high  protective  tariff,  47-50;  the 
Trusts,  50-60;  demand  causes  of,  61-98;  population 
and  high  prices,  64,  65 ;  speculation  causes,  65-70 ; 
extravagance  a  cause,  76;  and  rising  standard  of  liv- 
ing, 76-82;  increased  gold  supply  as  cause,  82-98;  ac- 
counted for,  91,  92;  effect  on  wages,  99-109;  effect  on 
salaries,  109,  no;  effect  on  bonds,  110-114;  on  owning 
producers,  114-117;  on  interest,  117,  118;  and  crises, 
1 18-120;  and  social  reform,  120-122;  a  blessing  to 
many,  123,  124;  remedies  for,  123-153;  will  it  con- 
tinue? 125-140;  and  increased  gold  supply,  125-131 ; 
and  volume  of  trade,  134-140;  effect  of  world  war  on, 
140,  141;  offset  to  losses  because  of,  141-145;  arbi- 
trary plans  to  stop,  145-153 
Hooghe,  Peter  de,  prices  for  his  paintings,  17 

Ice  Trust  and  prices,  59 

Immigration,  increasing,  and  high  prices,  61-65 
Imports  of  the  United  States  in  1898  and  1913,  27 
Incomes,  affected  by  rising  prices,  109-111;  family,  and 

family  needs,   121 
India,  growth  in  population,  62;  higher  prices  in,  97; 

and  production  of  goods,  139 
Industry,  liable  to  crises  in  rising-price  periods,  118-120. 
Interest  rates  and  rising  prices,  117,  118 
Iron,  exhaustion  of,  25-27,  30 
Italy,  growth  in  population,  62 

Japan,  rising  prices  in,  97 

Jenks,  J.  W.,  and  price  histories  of  trusts,  52,  53 

Labor  unions,  and  high  prices,  37-45;  and  wages,  43; 

membership  in  the  United  States,  43,  44 
Labor,  helped  by  rising  prices,  101-109 
Land,  free  arable  exhausted  in  the  United  States,  24. 

25,  30;  failure  to  conserve,  75 
Leiter,  Joseph,  and  wheat  corner,  67 
Lumber,  imports  of  the  United  States  in  1898  and  1913, 

27;  prices,  29,  30 

Manufacturing  industries,  and   wage  expense,  41,  42; 
effect  on  of  rising  prices,  99,  100 


Index  165 


Massachusetts,  population  growth,  64 

Milk  Trust  and  prices,  59 

Money,  primary  unit,  14-16;  representative  of  gold,  15; 

to  be  kept  at  parity,   15 ;  gold  in  money  service,  86 ; 

increase  of  amount  in  circulation,  90 ;  service  and  gold 

increase,  132;  resorting  to  fiat,  147-149;  mistaken  way 

to  lower  prices,  146,  147 
Money  and  prices,  14-23 

National  resources,  disappearing,  and  high  prices,  81 
Natural  resources  of  the  United  States,  exhaustion  of, 
24-30;  failure  to  conserve,  75;  relation  of  disappear- 
ance to  prices,  81 ;  should  be  conserved,  144 
New  Zealand,  rising  cost  of  living,  12 
North  America,  density  of  population,  64 

Offsets  to  losses  through  rising  prices,  141-145 

Oil,   exhaustion   of,   25,  26;   prices,   29,   30;   trust  and 

prices,  57;  possible  synthetic  production,  137 
Oil  Trust  and  prices,  52,  53,  57 
"Old  Hutch"  and  wheat  corner,  66,  67 
Owning  producers,  gain  to  by  rising  prices,  114-117 

Payne-Aldrich  revenue  act,  48 

Pine,  exhaustion  of,  25-30;  prices  of,  29 

Population,  of  the  United  States,  43;  of  gainful  work- 
ers, 43,  44;  growth  of  leading  nations,  61-65;  growth 
in  the  United  States,  135 

Prices,  in  1896  and  1913,  1-6;  retail  in  the  United  States, 
2-6;  in  Canada,  6-8;  in  Great  Britain,  8,  9;  wholesale 
in  the  United  States,  9;  in  Canada,  10;  in  Great 
Britain,  10,  11;  in  other  countries,  12;  defined,  16; 
effect  on  of  supply  and  demand,  16-18;  and  gold,  19, 
20;  causes  for  rise  of,  21-23;  supply  causes  for  rise, 
24-60;  exhausting  natural  resources  and,  24-30;  re- 
tailers' undue  profits,  30-33;  adulterated  goods,  33-35; 
and  bad  distribution  of  goods,  34,  35;  and  cold  stor- 
age, 35-37 ;  and  labor  unions,  37-45 ;  and  transporta- 
tion rates,  45-47;  and  high  protective  tariff,  47-50; 
and  the  Trusts,  50-60;  demand  causes  for  higher, 
61-98;  population  and,  64,  65;  and  speculation,  65-70; 
wheat  corners,  66,  67;  extravagance  and,  70-76;  rising 
standard  of  living,  76-82;  tendency  downward,  80; 
and  increased  gold  supply,  82-98;  high  accounted  for, 
91;  effect  on  business  of  rising,  99,   lOo;  on  wages. 


1 66  Index 


101-109;  on  salaries,  109,  no;  on  bonds,  109-114;  on 
debtors  and  creditors,  114;  on  owning  producers,  114- 
117;  on  interest,  117,  118;  and  crises,  1 18-120;  and 
social  reform,  120-122;  benefits  in  higher,  123,  124; 
remedies  for  high,  124-153;  will  they  continue  to  rise? 
125-130;  cause  of  higher,  125;  due  to  gold  increase, 
131;  may  continue  to  rise,  139,  140;  effect  of  world 
war  on,  140,  141 ;  offsets  to  losses  because  of  high, 
141-145;  arbitrary  means  to  stop  rising,  145-153;  rela- 
tive wholesale  and  retail  price  tables,  156-157 

Production  of  gold,  increase  in,  82-98;  accounts  for 
higher  prices,  91,  92;  increased,  probable,  135-140 

Progress  during  the  century,  135-140, 

Prosperity,  accompanying  higher  prices,  99;  for  owning 
producers,  114-117;  for  social  conditions,  124 

Protective  tariff,  high  and  high  prices,  47-50 

Remedies  for  rising  prices,  123-153 

Resources,   natural,   disappearing,   and  high  prices,  81 ; 

to  be  conserved,  144 
Retailers'  undue  profits  and  high  prices,  30-33 
Retail  prices,   in  the  United   States,  2-6,    106,   143;   in 
Canada,  6-8;   in  Great   Britain,  8,  9;   average   price 
tables,  154 
Rhode  Island,  population  and  prices,  63,  64 
Rising  prices,   effect   on   business,    99,    100;    on   wages, 
101-109;  on  salaries,  109,  no;  on  bonds,  110-114;  on 
debtors  and  creditors,  114;  on  owning  producers,  114- 
117;  on  interest  rates,  117,  118;  and  crises,  1 18-120; 
and  social  reform,   120-122;  not  altogether  evil,   123, 
124;   remedies   for,   123-153;   will  they   last?    125-130, 

139,  140;  their  cause,  125;  gold  output  and,  125-131 ; 
and  volume  of  trade,  134-140;  effect  of  world  war  on, 

140,  141;  offset  to  losses  through,  141-145;  means  to 
stop,  145-153 

Rising  standard  of  living,  76-82 

Rubinow,  I.  M.,  and  wage-purchasing  power,  107,  108 

Russia,  growth  in  population,  62 

Salaries,  and  higher  prices,  109,  no 

Silver-standard  countries  and  prices,  97 

Social  reform,  and  rising  prices,  120-122,  142-144;  gains 

of,  124 
South  America,  density  of  population,  64 
Speculation  and  high  prices,  65-70 
Standard  of  living  and  high  prices,  76-82 


Index  1 67 


Steel  Trust  and  prices,  52,  53,  57,  58 

Stock,  watered,  68 

Sugar  Trust  and  prices,  52-55 

Sugar,  prices  and  Trust,  52,  56;  possible  synthetic  pro- 
duction, 137 

Supply,  and  demand  and  prices,  16-18;  and  gold,  18-20; 
causes  for  rise  in  prices,  23-60;  increased,  of  gold, 
82-98 

Switzerland,  rising  cost  of  living,  12 

Tariff,  high  protective  and  cost  of  living,  47-50;  and 

the  Trusts,  50-52 
Timbermen,  gain  in  rising-price  period,  114,  115 
Tin  Plate  Trust,  52 
Trade,  expanding  volume  of,  134-140 
Trade  union  activity  and  rise  in  wages,  39,  40,  43    . 
Transportation   rates  and  high  prices,  45-47 
Transvaal  and  gold  output,  126,  127 
Trusts,  and  high  prices,  50-60;  cost  cheapeners,  52-59 

Underwood-Simmons  act  and  prices,  48,  49 

Union  labor  groups  and  wages,  105-107 

United  States,  retail  prices  in  the,  2-6,  156;  wholesale 
prices  in  the,  9,  157;  money  of,  14-16;  gold  dollar,  14, 
16;  exhaustion  of  natural  resources,  24-30,  75;  con- 
sumption of  foodstuffs,  27;  imports  in  1898  and  1913, 
27;  production  of  wheat,  27;  cattle  product,  27,  28; 
cattle  diseases,  28;  manufacturing  industries  and  wage 
expense,  41 ;  population,  and  gainful  workers,  43,  44 ; 
freight  rates  and  receipts,  45-47;  protective  duties  and 
prices,  48,  49;  growth  in  population,  and  immigration, 
62-65,  135;  harmful  speculation,  69,  70;  extravagance, 
70-76;  deaths  and  accidents,  74;  army  and  navy  cost, 
75 ;  rising  standards  of  living,  76-82 ;  increasing  vol- 
ume of  business,  90,  91;  wage  reports,  105-107;  bond 
decline,  112;  farm  values,  115,  116;  happy  period  for 
owning  producers,  114-116;  bank  check  system,  133; 
probable  increased  production,  138;  plan  to  limit  out- 
put of  gold,  152 

Valuations,  all  stated  in  money  or  gold  terms,  19 
Value-measuring  unit,  gold,  14-16 

Wages,  for  1907  and  preceding  years,  38,  39;  and  rise 
in  prices,  39;  and  production  expense,  41;  rise  in,  42, 


I 68  Index 


43;  and  labor  unions,  43-45;  bricklayers,  78;  effect  on 
of  higher  prices,  101-109;  wage-study  reports,  104- 
109;  and  interest,  117;  wage-earning  class  and  higher 
prices,  123,  141,  142 

War,  the  world,  effect  on  prices,  140,  141 

Watered  stock  and  prices,  68 

Wealth,  multiplying  in  the  United  States,  135 

Wheat,  production  of  in  the  United  States,  27,  30;  pro- 
tective tariff  and  prices,  49;  and  Trust  control,  55; 
cornering,  66,  67 

Whisky  Trust,  52 

Wholesale  prices,  in  the  United  States,  9;  Canada,  10; 
Great  Britain,  10,  11;  1890-1899  compared  with  1913, 
29;  and  wage  rise,  39,  40;  of  sugar,  54;  rise  from 
1897  to  1913,  91;  of  commodities,  iii,  112;  relative 
price  tables,  157 

W^ilson  act  and  prices,  48 

Wire  Trust,  52 

Workers,  gainful  in  the  United  States,  43,  44;  wages 
and  higher  prices,  99-109 


DATE  DUE 

CAYLORD 

PRINTEO  IN  US    A. 

UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


A  A      000  030  704    1 


